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1、10ExportSubsidiesinAgricultureandHigh-TechnologyIndustries1.DescribetheimpactofeachofthefollowinggoalsfromtheHongKongWTOmeet-ingon(i)domesticpricesandwelfareofthecountrytakingtheactionand(ii)worldpricesandwelfareforthepartnercountries.a.Eliminationofagricultureexportsubsidies.Answ
2、er:Agricultureexportsubsidiesinasmallcountryhavetheeffectofrais-ingdomesticprices.Exportsubsidiesinalargecountryhavetheeffectofrais-ingdomesticpricesandloweringforeignprices.Assuch,anycountryabolish-inganexportsubsidywoulddecreasedomesticprices.Theassociateddecreaseindeadweightlos
3、swouldincreasedomesticwelfare(evenmoresoinalargecountryinwhichtheabolitionofthesubsidyimprovesitstermsoftradeaswell).Intherestoftheworld,importersnolongerderiveaterms-of-tradebene?tfromtheexportcountry’ssubsidizationprogram;therefore,theyimportathigherpricesandhavelowerwelfareafte
4、rsubsidiesareabolished.Foreignexporters,ontheotherhand,enjoyaterms-of-tradeandwelfaregain.b.Reductionofagriculturaltariffs.Answer:Agriculturetariffsinasmallcountryalsohavetheeffectofraisingdo-mesticprices.Tariffsinalargecountryhavetheeffectofraisingdomesticpricesandloweringforeign
5、prices.Assuch,anycountryabolishinganagriculturaltar-iffwoulddecreasedomesticprices.Theassociateddecreaseindeadweightlosswouldincreasedomesticwelfareinasmallcountry,butwelfarewoulddecreaseinalargecountryduetoworseningtermsoftrade.Intherestoftheworld,ex-portersnolongersufferaterms-o
6、f-tradelossfromtheimportcountry’stariffregime;therefore,theyexportathigherpricesandhavehigherwelfareaftertar-iffsareabolished.Foreignimporters,ontheotherhand,sufferaterms-of-tradeandwelfareloss.c.Duty-free,quota-freeaccessfor97%ofgoodsoriginatingintheworld’sleastde-velopedcountrie
7、s.Answer:Asinpart(b),removingtariffsandquotasdecreasespricesanddead-weightlossesintheimportmarket.TheexportingLDCswillbene?tduetohigherexportpricesandwillenjoyagaininwelfareasaresult.Conversely,im-portingLDCswillfacehigherworldpricesandhavelowerwelfare.Thewelfarecalculationforothe
8、rpoorcountriesnotincludedamongthe
