Question

In: Economics

European Union (EU) was the largest wine exporter in 2013 and EU subsidized wine export. It...

European Union (EU) was the largest wine exporter in 2013 and EU subsidized wine export. It is safe to assume that EU’s policy on wine would affect the world price of wine.

  1. Suppose the subsidy to wine export was s, analyze its impact on wine price, consumption, production, consumer surplus, producer surplus, and welfare in EU with a graph.
  1. Chili was a small wine exporter in 2013. Analyze the impact of EU’s wine export subsidy on Chili’s production of wine and national welfare with a graph.
  2. ) China is a large wine importer in 2013. The majority of foreign wine in Chinese market was imported from EU. Analyze the impact of EU’s wine export subsidy on China’s wine production and national welfare with a graph.
  1. The Chinese government started an antidumping investigation of EU wine in 2013. Based on the information provided by the question and your understanding of dumping behavior under WTO rules, provide an antidumping analysis of EU wine in China as a third-party economist and make a recommendation to Chinese government whether antidumping duty should be levied on EU wine. (You have to clearly state the WTO rules on dumping in your analysis.)

only answer Q4, explain pls

Solutions

Expert Solution

The majority of foreign wine in Chinese market is imported from EU. However it's a cause for dynamically growing economy, GDP and plays an important role in social and business life but Chinese people are not traditional wine drinker and don't know much about wine culture.

Majority of wine consumers in chinC are young people of the age between 30-45 years among which 70% are men and the rest are women. Therefore China needs to take important disciplinary action against the dumping of EU wine in China.

Anti dumping probe is a protectionist tariff that a domestic government imposes on foreign imports in case it believes that the foreign imports are priced below than the fair market value.

According to WTO's anti dumping agreement:

a. An economy can levy tariff on imports bring it's price somewhere close to the fair market value or

b. Can stop certain imports on an urgent basis for the sake of it's economy

c. And can also go through WTO's mechanism for settling of disputes in case required.

Here, in my opinion the Chinese government should go with the decision to levy tariff on imports of EU wine so that it can be sold there on fair price and can manage dumping in this way.


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