operate in a vacuum. Instead, firms sell their products either to consumers or to other firms (if they are

business suppliers), who are also affected by the trade barriers. A demand and supply analysis of

protectionism shows that it is not just a matter of domestic gains and foreign losses, but a policy that imposes

substantial domestic costs as well.

Consider two countries, Brazil and the United States, who produce sugar. Each country has a domestic supply

and demand for sugar, as Table 20.1 details and Figure 20.2 illustrates. In Brazil, without trade, the
474 20 • Globalization and Protectionism

equilibrium price of sugar is 12 cents per pound and the equilibrium output is 30 tons. When there is no trade

in the United States, the equilibrium price of sugar is 24 cents per pound and the equilibrium quantity is 80

tons. We label these equilibrium points as point E in each part of the figure.
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