foreign producers, politicians can point out that, because of the trade treaty, their hands are tied.

20.5 The Tradeoffs of Trade Policy

International trade certainly has income distribution effects. This is hardly surprising. All domestic or

international competitive market forces are disruptive. They cause companies and industries to rise and fall.

Government has a role to play in cushioning workers against the disruptions of the market. However, just as it

would be unwise in the long term to clamp down on new technology and other causes of disruption in domestic

markets, it would be unwise to clamp down on foreign trade. In both cases, the disruption brings with it

economic benefits.

Self-Check Questions

1. Explain how a tariff reduction causes an increase in the equilibrium quantity of imports and a decrease in

the equilibrium price. Hint:Consider the Work It Out "Effects of Trade Barriers."
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