Regional Trade Arrangements and Their Impact on Grain Imports
What is the quantity of bushels Hungary imports in free trade and with tariffs and customs union?
Calculate the quantity of bushels Hungary imports when the three nations engage in free trade. Enter this value in the first row of the following table. Also indicate which country Hungary imports from.
In the second row of the previous table, enter the quantity of bushels Hungary imports with the tariff and the country it imports from.
In the last row of the previous table, enter the quantity of bushels Hungary imports with the customs union and the country it imports from.
Answer:
In free trade, Hungary imports 18,000 bushels of grain from Australia. With a tariff, Hungary imports 12,000 bushels from Australia. With a customs union, Hungary imports 18,000 bushels from Italy.
Regional trade arrangements can have a significant impact on the import and export dynamics of countries. In the case of Hungary, the country's grain imports are influenced by its trade agreements with Australia and Italy.
Under free trade conditions, Hungary imports 18,000 bushels of grain from Australia based on the country's efficiency in grain production. With the imposition of a tariff, the quantity of imports decreases to 12,000 bushels from Australia. However, with the formation of a customs union with Italy, the imports increase back to 18,000 bushels but from Italy this time.
Trade agreements not only affect the quantity of imports but also play a role in shaping trade creation and consumption effects. In Hungary's case, the customs union with Italy led to trade creation effects, allowing for increased imports from Italy.