THE ARGUMENTS FOR RESTRICTING TRADE
The letter from the economics team persuades the new president of Isoland to consider opening up trade in steel. She notes that the domestic price is now high compared to the world price. Free trade would therefore. cause the price of steel to fall and hurt domestic steel producers. Before implementing the new policy. she asks Isolandian steel companies to comment on the economists’ advice Not surprisingly, the steel companies are opposed to free trade in steel. They believe that the government should protect the domestic steel industry from foreign competition. Let’s consider some of the arguments they might give to support their position and how the economics team would respond.
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