Question

A) Why US is having an import quota of sugar and what is its impact on US domestic production?

B) What is the impact of an import quota on the sugar price in US and why consumers are not opposing this?          

Explain in detail.  

Answer 1

a. US economy has an advantage to produce large amount sugar. But the sugar production in one hand is labour oriented and US tried to import it from other countries. This higher level of import will affect the sugar producers and the workers directly or indirectly connected to this. Thus the US government planned to make an import quota over the import of sugar. This import quota will reduce the dependence of sugar over other countries and promote the domestic production of sugar.

b. This import quota will increase the price of sugar domestically. Sugar is an essential commodity, so the US consumers will demand sugar at whatever price level. The promotion of sugar producing firms will increase the employment level in US and this will increase the living standard also. This increasing sugar production will add to the real GDP of the country also. The increasing production will increase the demand within the country and reduce the capital outflow towards other foreign countries.