Step 9. Determine the net effect. The producer surplus increases by the area Ptrade, C, E, PNoTrade. The loss of
consumer surplus, however, is larger. It is the area Ptrade, A, E, PNoTrade. In other words, consumers lose more
478 20 • Globalization and Protectionism

than producers gain as a result of the trade barriers and the United States has a lower social surplus.

Who Benefits and Who Pays?

Using the demand and supply model, consider the impact of protectionism on producers and consumers in

each of the two countries. For protected producers like U.S. sugar farmers, restricting imports is clearly

positive. Without a need to face imported products, these producers are able to sell more, at a higher price. For

consumers in the country with the protected good, in this case U.S. sugar consumers, restricting imports is

clearly negative. They end up buying a lower quantity of the good and paying a higher price for what they do
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