Question

Sugar production is highly protected in the United States. Sugar importers must pay such high tariffs that it is hardly profitable for them to sell any sugar in the United States. Who are the inners and losers from such protectionism? Is the resulting market economically efficient? Why? If not, why would the government continue import restrictions that promote economic efficiency?  

Answer 1

Sugar production is highly protected in United states. Sugar importers must pay such high tariffs that it is hardly profitable for them to sell any sugar in the United States.

Here the winners are the domestic sugar producing industries. This is because they don’t have to face heavy competition as they are protected by the US government tariff policy.

The losers are the US consumers, industries which are using sugar as input, import related industries. As the domestic sugar producing industries are protected by government tariff policy they will produce and sell sugar at higher price. For this reason the US consumers and industries use sugar as input has to pay high price for sugar. The import related industries will also not grow fast in US market as they has to pay high tariffs and for this their profits is very less.

No, the market is not economically efficient because tariffs policy decrease the overall efficiency. As the US government protect the domestic sugar producing the US consumers and those industries use sugar as an input has to pay higher price for inferior quality of sugar.

The government continue import restrictions that promote economic efficiency to protect the domestic sugar producing industries. For this US government is protecting these industries so that it can grow. Again tariff imposed on imported sugar will also bring revenue to the US government. So the US government is helping the US sugar producing industries to grow.