Solaria’s solar-panel industry

Read the extracts and answer the questions that follow.

Text A — Developing domestic production

1. Solaria imports most of its solar panels. Its government has introduced a temporary tariff to protect the new domestic industry. It argues that this infant industry needs time to train workers, increase output and achieve economies of scale.

2. The tariff has increased domestic production and employment. However, electricity companies now pay more for panels, raising the cost of expanding renewable-energy capacity. Consumer groups also claim that buyers have fewer models from which to choose.

Text B — Conditions and foreign reactions

1. Protection will expire after five years, and domestic producers must meet annual productivity targets. The government expects tariff revenue to help finance technical education.

2. Solaria’s main trading partner has threatened retaliation against its fruit exports. Exporters warn that this could reduce employment and foreign-exchange earnings.

Table 1 — Solar-panel market data

Solaria’s annual solar-panel market data before and after the tariff.

Table 2 — Macroeconomic data

Solaria's export revenue after the tariff.

Carbon standards in Veridia

Read the extracts and answer the questions that follow.

Text A — A border carbon requirement

1. Veridia requires imported cement to document its carbon emissions and pay a charge when emissions exceed its domestic standard. The government says the policy enforces environmental standards and prevents foreign producers from gaining a cost advantage by passing pollution costs to society.

2. Domestic cement output has risen, but construction companies face higher prices. Some small foreign suppliers have left the market because certification is costly.

Text B — Protection or correction?

1. Environmental groups support the policy because cement production creates a negative externality. Trading partners argue that the complex paperwork is an administrative barrier designed to protect Veridian firms.

2. The government plans independent emissions audits and will apply identical carbon rules to domestic and foreign cement. It will use the revenue to subsidize cleaner technology.

Table 1 — Cement imports

Annual cement imports before and after the border carbon requirement.

Table 2 — Construction activity

Construction activity in Veridia before and after the border carbon requirement.

Steel imports into Lydora

Read the extracts and answer the questions that follow.

Text A — An anti-dumping investigation

1. Lydoran steel producers allege that foreign firms are selling steel below the price charged in their home market. The government is considering an anti-dumping duty after an independent investigation.

2. Steel producers argue that temporary protection will prevent plant closures and preserve skilled employment. Vehicle and construction firms oppose the duty because imported steel is an important input.

Text B — Competing explanations

1. Importers say lower foreign prices reflect greater productivity rather than dumping. They warn that the duty would reduce competition and weaken domestic firms’ incentive to innovate.

2. The exporting country has threatened restrictions on Lydoran agricultural goods. The government will review the duty after two years and remove it if evidence of injury no longer exists.

Table 1 — Steel prices

Steel prices charged by a foreign exporter.

Table 2 — Employment data

Employment in Lydora's steel sector and steel-using industries.

Diversification in Kisiwa

Read the extracts and answer the questions that follow.

Text A — Dependence on cocoa

1. Kisiwa is an economically least developed country whose exports are dominated by cocoa. Falling cocoa prices have reduced incomes and government revenue. The government wants economic diversification into processed foods and textiles.

2. It proposes temporary tariffs on competing manufactured imports, together with worker training, roads and business loans. Support will end after six years and will depend on productivity and export targets.

Text B — Risks of protection

1. Supporters expect manufacturing to create stable urban employment and higher-value exports. Tariff revenue may help finance infrastructure because collection at the border is easier than administering income taxes.

2. Opponents argue that protection will raise prices and encourage firms to seek continued support rather than become efficient. Imported machinery may also become more expensive, reducing export competitiveness.

Table 1 — Export composition

Kisiwa’s export composition.

Table 2 — Manufacturing data

Manufacturing employment and import-price index at two points during protection.

Automotive protection in Meridia

Read the extracts and answer the questions that follow.

Text A — Protecting assembly jobs

1. Meridia imposed a tariff on imported cars after several assembly plants announced closures. The government argues that workers would otherwise experience structural unemployment because their skills and locations do not match available jobs.

2. Domestic car production has risen. However, local manufacturers import engines and electronic components, whose prices have also increased because of separate tariffs.

Text B — Effects beyond the industry

1. Consumer groups report higher car prices and fewer models. Economists argue that sheltered firms may become dynamically inefficient by reducing investment in new products and production methods.

2. Meridia’s trading partners are considering tariffs on its software exports. The government is comparing continued car protection with retraining and relocation grants for displaced workers.

Table 1 — Employment

Employment observed before and after the automotive tariff; the figures show changes but do not establish causation.

Table 2 — Prices and exports

Prices and exports in Meridia

Import controls in Selucia

Read the extracts and answer the questions that follow.

Text A — The current account deficit

1. Selucia has a persistent current account deficit. Its government has imposed tariffs on imported household appliances to achieve balance of payments correction by switching expenditure toward domestic goods.

2. Appliance imports have fallen, but domestic factories import motors and computer chips. Higher input prices have increased their costs and reduced their ability to export.

Text B — Exchange rates and retaliation

1. Supporters argue that lower import spending will reduce demand for foreign currency and may cause the selu to appreciate. Exporters warn that appreciation would further reduce their export competitiveness.

2. Trading partners may retaliate against Selucia’s agricultural exports. Economists propose supply-side policies to raise productivity as an alternative to long-term protection.

Table 1 — External trade

Selucia's annual trade in goods and services before and after tariffs.

Table 2 — Appliance industry

Annual output and exports of Selucia’s appliance industry before and after tariffs.

Seafood standards in Pelagos

Read the extracts and answer the questions that follow.

Text A — Traceability rules

1. Pelagos requires imported seafood to carry digital records showing where it was caught and whether fishing methods met sustainability rules. The government says the regulations prevent unsafe food and protect marine ecosystems.

2. Importers describe the traceability system as an administrative barrier because approval can take several weeks. Seafood imports and the range of products in supermarkets have fallen.

Text B — Domestic and international effects

1. Domestic fishers have gained market share, but some have delayed efficiency improvements. Restaurants face higher costs and have reduced employment.

2. Trading partners claim that Pelagos is using environmental concerns as disguised protectionism. The government proposes common electronic records and independent inspections applying equally to domestic and imported seafood.

Table 1 — Seafood market

Seafood imports and product varieties before and after traceability rules.

Table 2 — Restaurant sector

Restaurant sector before and after traceability rules.

Solar-panel production in Ardania

Ardania is seeking to develop a domestic solar-panel industry. Four years ago, its government imposed a tariff of 20 ardos per panel on imported panels. The government stated that the tariff would be temporary and would allow domestic producers to achieve economies of scale, train workers and reduce average costs.

Table 1 shows market and industry data before the tariff and in year 4.

Solar-panel market and domestic industry data in Ardania, with a linear-demand assumption for the observed points.

Environmental organizations argue that the tariff increases the cost of installing renewable energy. Domestic producers are requesting that the tariff be maintained for another five years, although their average cost remains above the world price. Ardania's trading partners have warned that they may retaliate against its agricultural exports.

Food security in Belpaesa

Belpaesa imports a large proportion of its wheat. Following disruptions to international shipping, its government imposed an import quota to protect domestic production and improve national food security. Import licences are auctioned to importing firms.

Table 1 shows the wheat market before and after the quota.

Belpaesa's annual wheat market before and with the import quota.

Domestic farmers support the quota because it has increased production and employment. Bakeries and low-income households oppose it because wheat is an important input into bread production. Two major trading partners are considering restrictions on fruit exported by Belpaesa.

Alleged dumping of ceramic tiles in Deltora

Ceramic-tile producers in Deltora claim that exporters from Estavia are dumping tiles in Deltora's market. Following an investigation, Deltora imposed an anti-dumping duty of 18 dollars per square metre.

Table 1 provides price and market data.

Ceramic-tile prices and annual quantities in Deltora before and after the anti-dumping duty.

Construction companies argue that Estavian producers are simply more productive and that the duty raises the cost of housing. Domestic tile producers argue that temporary protection is necessary to prevent foreign firms from eliminating competition and later raising prices.

Economic diversification in Kintala

Kintala is an economically least developed country whose export earnings depend heavily on coffee. A decline in world coffee prices has reduced export revenue. To encourage diversification, Kintala imposed a $25\%$ tariff on imported shirts and announced that the tariff would remain for five years.

Table 1 shows data for Kintala's shirt market.

Kintala's annual shirt market before and after the tariff, with domestic demand assumed linear between the two price–quantity combinations shown in Table 1.

Table 2 gives additional economic data.

Additional economic data for Kintala, including the demand-curve assumption used for consumer-surplus analysis.

Domestic clothing producers claim that temporary protection will allow workers to develop skills and firms to invest in better machinery. Retailers argue that households now face higher clothing prices and less choice.

Safety standards for imported toys in Montara

After reports of unsafe imported toys, Montara introduced compulsory testing and certification for every imported toy model from a foreign producer. Domestic producers are already subject to Montara's safety rules. Compliance is expected to add 4 monts to the price of each imported toy.

Table 1 shows market and safety data before and after certification.

Montara annual toy market and safety data

Consumer organizations support evidence-based safety rules. Importers argue that requiring each product model to be retested in Montara, even when it has been certified under equivalent foreign standards, is an unnecessary administrative barrier. A trading partner has threatened to impose similar checks on Montara's exports.

Electronics protection in Montara

Read the extracts and answer the questions that follow.

Text A — From assembly to innovation

1. Montara has protected domestic electronics firms for ten years. The policy was originally justified using the infant-industry argument. Producers now supply most of the domestic market but remain dependent on imported components.

2. Industry leaders request another five years of protection. They claim that scale economies are still developing. Critics say firms have become dependent on protection and devote resources to lobbying rather than innovation.

Text B — Efficiency and global supply chains

1. Productivity growth has slowed and product quality ratings have fallen. Economists describe this as dynamic inefficiency caused by weak competition.

2. Tariffs on imported components raise costs for electronics exporters. Foreign firms are also moving regional supply contracts elsewhere, reducing Montara’s export competitiveness.

Table 1 — Productivity and quality

Annual productivity and product-quality indicators for Montara’s electronics industry.

Table 2 — Trade data

Imported-component costs and electronics exports in Montara

Medical-equipment production in Virelia

Read the extracts and answer the questions that follow.

Text A — Temporary strategic protection

1. Virelia imported nearly all ventilators before a global health emergency disrupted supplies. The government now protects a new domestic medical-equipment industry using a temporary tariff and public procurement contracts.

2. Officials combine the infant-industry argument with national security. Firms must reduce unit costs, meet international safety standards and begin exporting before protection expires after four years.

Text B — Stakeholders and alternatives

1. Domestic output and technical employment have increased. Hospitals, however, pay more for equipment, and some foreign models are unavailable. Producers using imported sensors also face higher costs.

2. Economists argue that stockpiles, diversified foreign suppliers and direct research grants may provide resilience with less distortion. They warn that firms may engage in rent-seeking to extend protection.

Table 1 — Production and costs

Table 1. Domestic ventilator production and average unit cost from year 0 to year 4 of temporary protection.

Table 2 — Hospital and employment data

Hospital purchase price and technical employment before protection and after year 4.

Carbon emissions and steel imports in Carbonea

Carbonea applies a domestic carbon price of 50 euros per tonne of carbon dioxide emitted by its steel producers. The government plans to introduce a carbon border charge on imported steel. The charge would equal the difference between the carbon emissions embodied in one tonne of imported steel and one tonne of domestic steel, multiplied by the domestic carbon price.

Table 1 gives data on the proposed charge.

Proposed carbon border charge data for steel in Carbonea.

Table 2 gives information about possible effects on vehicle producers and exporters.

Vehicle production, steel use and export information for Carbonea.

Supporters claim the charge will prevent unfair competition and reduce carbon leakage. Opponents argue that it will increase costs for Carbonea's manufacturers and may be environmental protectionism in disguise.