417143 Responseshttp%3A%2F%2Fwelkerswikinomics.com%2Fblog%2F2008%2F09%2F25%2Fwhats-koreas-beef-with-the-us-on-trade%2FWhat%27s+Korea%27s+%22beef%22+with+the+US+on+free+trade%3F2008-09-25+07%3A46%3A17Jason+Welkerhttp%3A%2F%2Fwelkerswikinomics.com%2Fblog%2F2008%2F04%2F20%2Fwhats-koreas-beef-with-the-us-on-trade%2F to “What’s Korea’s “beef” with the US on free trade?”

1. # Alex Hanon 26 Sep 2008 at 9:31 pm

   I have seen the extent of how much the Korean population objects to the beef trade. During my visit to seoul this summer, the news was constantly showing images of tens of thousands of people crowding into the city centers with lit candles as a sign of protest to the government. Despite some obvious potential advantages of a free trade, the Korea seems to oppose it. However I think it is rather naive to consider the Koreans ridiculous because of economic reasons.

   I believe a great aspect which affects Korea's opinion is the internal political condition. S Korea has recently reelected a president (President Lee Myoung Bak), who is known to be a pro-upper, rich class. This has affected his domestic policies (real estate for instance comes to mind). Many of his policies have disappointed the labor or lower classes, which make up a great percentage of the population. I believe the problem with mad cow desease has actually acted as a spark which releases all the harsh feelings toward the government. As a result, these people who have "beeef" with the government have been protesting for months. The government, which has to maintain a democracy and a "for the people" attitude is presumably having difficulties establishing a free trade when so many people are showing opposition.

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2. # Alex Hewaton 27 Sep 2008 at 5:31 pm

   I used to live in Korea and I remember the huge news coverage this got. If I remember correctly, after the mad cow scare, Korea turned to Australia to import beef. It cost a ridiculous amount too, I remember my mum constantly complaining about it. The people who gain from the free trade in Korea are manufactures. This trade agreement should strengthen US-Korean ties even more. The Korean government has been urging the US to slowly withdraw troops from the country but even though peace efforts are strengthening (then they get set back again, latest was when NK fired at a South Korean woman who apparently overstepped the boundary lines) the US continues to want their presence within the country. This results in a tense relationship and hopefully the trade agreement will make it more secure.

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3. # Jennyon 21 Nov 2008 at 10:30 pm

   The graph illustrates the economic effects of the tariff placed on the import of Korean cars into the United States. It thereby helps to demonstrate who the winners and losers from free trade will be. Consumers will benefit from free trade because they will have to pay a lower price for the cars. This is because, with the tariff in place, competition will be decreased for domestic producers and they can ask a higher price. It is for a similar reason that foreign producers can also be considered “winners”. With free trade, competition will increase and shift price down to Pworld and people will buy the cars from the most efficient producers (Koreans). The diagram clearly shows that the losers from the free trade of cars between the United States and Korea will be the American producers. The tariff makes it more expensive for Americans to buy Korean cars, so they will choose to buy the American cars, which now appear cheaper. However, society as a whole will benefit because there will no longer be domestic over allocation of goods or foreign under allocation of goods, which will then remove the dead weight loss that the tariff caused.

   Even though, if tree trade between the United States and Korea were to happen, society as a whole would be better off, there would also be certain “losers”. As stated, society would benefit because of the removal of the DWL, as would Korean car producers. To that, Korean consumers would also profit from the increase in competition. The losers, however, would be the Korean cattle farmers. This is because the with American beef producers now also competing in the market, there will be more competition and the prices will fall. Therefore, their total revenue would decrease.

   In the long run, it is possible for the free trade between America and Korean to create jobs in America. This is because, even though some jobs will be lost to more efficient Korean producers, American producers will be forced to allocate their goods to their best use.

   Politicians often oppose such deals because, in order to get elected, they only think about the effects that will be visible in the short run and tell the voters what they want to hear.

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4. # Pedro.ecsla.f09on 06 Jan 2010 at 6:34 pm

   1. The graph shows the effects of the tariff in the USA car market.

   2. In the graph is easy to easy how will win if the tariffs disappear (the consumer will have to pat lees, the Korean companies will be able to sell more and other companies which are not from this sector will be benefited by the money that the USA people has now to buy other things because the car is cheaper) and how lose with this (the USA car companies that has to decrease a lot their prices losing a lot of revenue.

   3. This free trade will destroy some jobs in the car sector but it will create other jobs (the civil servant that control the exports and all that new job that the companies of other sector in which the people spend more money because the haven’t spend it in the car)

   4. Because all that benefits that the people will receive are in the long run but all the problems are in the short run (and the democracy government do not like this because the election are in the short run)

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5. # Pedro.ecsla.f09on 06 Jan 2010 at 6:37 pm

   To Jenny

   I think that all you say is very clever, you explain quiet well and I am almost totally agree with you, the only thing I am not totally agree is that you say that the looser will be the American producer but with the dates given we could only ensure that the USA car producer will lose with the free trade

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6. # jiyoon.ecslb.f09on 07 Jan 2010 at 3:50 am

   These are very interesting questions and nice article to read of since I am South Korean and know little more about what I don’t know about Korean history and also economies.

   First of all, the graph illustrates the concepts of tariff in the USA car market. Therefore supports to prove who are the winners and the losers from the free trade. The graph shows that people will buy Korean cars more rather than Americans because it is cheaper for now. Therefore, it is beneficial for both sides who can receive money and who can buy a product with a cheap price.

   According to what I see, consumers are more likely to benefit from the free trade since they will have to pay a lower price for the cars. The reason why is that with the tariff in place, competition will be decreased for domestic producers and they could ask for a higher price. The diagram also represents that the losers from the free trade of cars between the US and Korea will be the American producers. Eventually, it seems that the tariff makes it more expensive for Americans to buy the Korean cars; therefore, American will prefer to buy more of their own productive cars rather than Korean ones.

   It seems to me that the free trade will destroy but also will benefit. I looked at both sides. It some jobs in the car sector might be abolished but it will create other occupations. On the other hand, there won’t be domestic over allocation of goods or foreign under allocation of goods anymore which means that this then removes the dead weight loss that the tariff caused. Although we know that if free trade between the US and Korea were to happen, society as a whole would be better off, which means there would be some “losers”. Hence, Korean consumers would also profit from the increase in competition. The “losers” could be the Korean farmers who are also starting to compete for the market.

   Politicians oppose free trade deals that would result in such improvements in efficiency because all of those benefits the people who will receive in the long run, but most of all the difficulties are in the short run. In the long run, it is quite possible for the free trade between America and Korean to make new occupations in US since although, some jobs will be gone more effectual Korean producers, American producers will be strengthened to assign their goods to their greatest use.

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7. # Alison.ecslb.f09on 08 Jan 2010 at 12:36 am

   1. How does the graph illustrate the concept of “winners and losers from free trade”?

   The graph illustrates the concept of “winners and losers from free trade” as it shows the effects of a tariff of the American car market. As the price of Korean cars decreases and the price of American cars remains stable, it follows that there will be an increased consumption of Korean produced cars. Thus, the Korean car producers and the American consumers will be the “winners” in this situation, while the American car producers will be the “losers”.

   2. Who gains and who loses from free trade with the US within Korea?

   Within Korea those affiliated with the production of cars/car parts would be the winners. Firms which receive a large part of their revenue from the importing of beef from more expensive countries will be the losers. These two statements can be explained by the fact that opening free trade between Korea and the US will serve to decrease the price of cars in the US and simultaneously decrease the price of beef in Korea.

   3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

   In the short run the free trade agreement between Korea and America will serve to decrease the amount of jobs in the US; however, in the long run it can be said that the opposite will happen as a result of an increase in civil workers and other jobs increases due to the change in the allocation of the US’s resources.

   4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

   This ties in to the answer of the previous question – short run vs. long run. Because politicians are only in office for a short period of time, they look at the short term results rather than the long run results. Even though these free trade deals have positive long range results such as improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers, they have negative short range results that would not be beneficial for their political careers.

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8. # Alison.ecslb.f09on 08 Jan 2010 at 12:42 am

   To jiyoon.ecslb.f09

   No offense, but I think you have it backwards in regards to the second question. The way I see it is that the tariff will result in a decrease in the prices of Korean cars in America, which will result in an increase in American consumption of Korean cars. These cars will be of slightly worse quality, but the quantity will be larger, and due to the lower price, they will be preferred over American produced cars.

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9. # john.ecsla.f09on 08 Jan 2010 at 12:46 am

   1. The graph shows the tariff's effect on the car market.

   2. Consumers of American automobiles in Korea wll benefit, while the auto companies that make Korean cars in Korea will suffer, because revenue would go down as a result of a free trade agreement freeing up price levels.

   3. A free trade agreement could create jobs in the long run, but in the short run more jobs will be terminated then made.

   4. Politicians are trying to get elected in the short run, but effects of a free trade agreement are negative before they are positive. Because of increased competition, jobs will first disappear, but as the economy ges better, more jobs oculd be created. However, a politician trying to get elected when the free trade agreement is announced will be long gone before any positive effects are felt from the agreement.

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10. # john.ecsla.f09on 08 Jan 2010 at 12:47 am

    Pedro,

    What do you mean about the civil servant from qestion number 3? Wouldn't there already be a civil servant in place controlling trade even before a free trade agreement was announced?

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11. # jiyoon.ecslb.f09on 09 Jan 2010 at 1:35 am

    To Alison.ecslb.f09,

    Alison, thank you very much for reminding me of my mistakes. I see it now that the ‘tariff will result in a decrease in the price of Korean cars in America’. Yes, and also this will result that the American consumptions will increase of Korean cars. It was a little confusion that I was struggling of, yes, it is true that because of the lower price, they will prefer to buy American produced cars, as you said, the quality would be slightly worse but the quantity will be larger. I will look back again my mistakes and catch up with the right answer! Thanks! It is always good to hear more information about my country, which concentrates me more to learn about.

    JiYoon

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12. # kerstin.ecslb.f09on 10 Jan 2010 at 1:09 am

    (1) The graph shows who would be “winning” with the tariff and who would be “winning” without the tariff. With, domestic producers would make a profit of PtQ2, while without they would only make a profit of PwQ1. With, foreign producers would make less profit, (Q4-Q2)Pw to be exact, while without, they would make a profit of (Q3-Q1)Pw.

    (2) In S Korea, many product producers (i.e. manufacturers) would make more profit, because they can offer their products at cheaper prices and so more Americans would buy their products. It is likely that S Korean service companies may suffer instead. S Koreans may find or think that American insurances (for example, as mentioned in the article) are more reliable and so they may trust them more.

    (3) Yes it is possible that they would create jobs in America. The Koreans may demand for products or (especially) services that they don’t produce themselves. In the article they mentioned insurance companies for example. If they need to insure more people, they will make more profit and hire more people to correspond to the increased demand, thus creating jobs.

    (4) I think that politicians firstly want to protect their own country and workers. They know American manufacturers may suffer. Also, they would make themselves more dependant on S Korea if they would trade with them. For example for cars; if more people buy S Korean cars, then American firms would reduce production. If S Korea would stop their trade for cars, then the American demand for them could not be satisfied. Also, I think politicians are against it out of fear; they think that diseases, like the Mad Cow Disease, could reoccur.

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13. # kerstin.ecslb.f09on 10 Jan 2010 at 1:16 am

    To Alison.ecslb.f09:

    I liked reading your answers; I thought (4) was especially interesting; I had not thought of the matter in that sense. You're so right in the sense that politicians most of the type try to "save the situation" in the short run;

    when the population sees that things are going well or getting better, they will vote or the politician again. If not, they won't. That's why everything needs to be good *at all times*. If the tariffs were taken off, then in the short run, the American economy would suffer, but in the long run it would benefit. However, the next political voting will most likely still be in the short run, so politicians have to fear not to be voted again.

    Good point!

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14. # michael.ecsla.f09on 10 Jan 2010 at 7:29 am

    1) How does the graph illustrate the concept of “winners and losers from free trade”?

    The graph shows that if Korean car prices fall, Korean car producers and American consumers will “win”, while American car producers will “lose”.

    2) Who gains and who loses from free trade with the US within Korea?

    Car producers will win, as more consumers will buy their cars, but beef importers will lose, as the price of domestic beef will plummet.

    3) Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    In the long run, more jobs will be created, as more negotiators, ambassadors and staff will be needed to handle the increase in American and South Korean diplomacy. In the short run, however, more jobs will be lost, as car manufacturers will close down due to being unable to compete with Korean prices.

    4) Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians care about the short run and about being reelected. In the short run, these agreements will be bad for America, thus hurting their chances of immediate reelection if they support them.

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15. # michael.ecsla.f09on 10 Jan 2010 at 7:32 am

    Kirsten.esclb.f09,

    You're right. However, that won't change a politician's viewpoint; they care about reelection, not helping the country, and the majority of American citizens care a lot less about the long term than the short term.

    Like or Dislike: 0  0

16. # Celine.ecslb.f09on 10 Jan 2010 at 9:15 am

    1. The graph shows the affects of tariffs on the American car market. In this case the Americans will be the “losers” because their cars will get relatively more expensive and the “winners” are the manufacturers in Korea because the demand for their cars will increase because it is getting less expensive for American consumers to buy them.

    2. The free trade, without the tariffs, the Korean car producers will gain because the demand for their goods will increase because it isn’t so expensive for Americans to purchase their cars. However, the people working with the beef will loose because the price of beef that is imported into the country will lose.

    3. Whether it is possible or not that jobs are created in American depends on the time frame that is being viewed. In the short run, probably not. In the short run, American companies will lose revenue because American consumers are allocating their money to Korean cars, which are cheaper. However, in the long run, it is possible that there will be an increase in job opportunities in America because they are allocating their resources more efficiently into different fields where they think they can create profit.

    4. Politicians still oppose free trade deals even though they might result in the improvement in the country because these improvements would only happen in the long run. Many politicians think rather in the short term, and in the short term, the country would suffer with the resulting lose of jobs.

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17. # Celine.ecslb.f09on 10 Jan 2010 at 9:20 am

    TO Alison:

    Regarding your answer to the fourth question, there is an aspect that you included that I thought was very true and well thought of. When you stated that politicians would still be opposed to free trade even if it helped a country, you also said that it is because politicians "are only in office for a short period of time, they look at the short term results rather than the long run results". This shows how egoistic the politicians actions can be. The positive effects of the free trade would probably only start to appear after they left office making it not beneficial for them, but rather look bad on their profiles because they were essentially the "cause" of unemployment.

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18. # Jack.ecslb.f09on 11 Jan 2010 at 4:29 am

    1. The graph shows the concept of winners and losers of free trade by the green and yellow boxes. The tariffs imposed will impede American consumers from buying Korean automobiles due to the raised price; however the Inland Revenue department would collect a large amount of tax from these items. Furthermore the graph also shows the decrease in demand of the domestic autos and the equivalent demand of imported cars can be added to the existing local demand of autos in Korea of the Korean companies.

    2. Obviously the Korean automobile industry would gain from the ability to sell in the American market; however other industries in Korea may lose due to an increase of American goods in Korea such as beef. Furthermore both governments would have an increase in tax revenue due to the increase in imports however there may be an increase in short term unemployment in the losing industries in both countries.

    3. In the long run, increased efficiency and lower prices in some areas would increase jobs in America as it would lead to increased disposable income due to lower prices and competition.

    4. In the short term some effects can be negative, therefore could create immediate adverse reactions from the public. Which as has been said, is politically terrifying, it seems no surprise that China seems to be one of the biggest supporters of free trade, certainly for their exports, as they seem more interested in long term efficiency and gain rather than short term boost, probably due to the lack of a democratic voting system.

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19. # Jack.ecslb.f09on 11 Jan 2010 at 4:36 am

    On question 4

    Aside from the short-term loss vs long-term benefits argument for politicians not supporting free trade, there is also the possibility that certain lobbyists from Ford, GM and others could have politicians – if not on the pay roll, driving nice cars shall we say, and this could lead to politicians making adverse decisions for the country to protect a few companies. It is always revealing to look at the contributers to politicians campaign funds and their resulting policies.

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20. # theresa.ecslb.f09on 11 Jan 2010 at 6:52 am

    The U.S. Automobile Market (with Tariffs) graph illustrates the concept of “winners and losers from free trade”. In this situation, American automobile manufacturers are considered to be the losers; this is so because the quantity demanded in the automobile market is less than it would normally be without a tariff (demonstrated by Q4 rather than Q3). The domestic quantity demanded exceeds the domestic quantity supplied, indicating a weakness in American manufacturers and signaling that S Korea is the winner in the situation, as the difference between what American can produce and what America needs is supplied by imports of Korea. Another illustration of how America becomes the losers is exhibited by the loss of efficiency or a consumer surplus lost (demonstrated by the green triangles Y and X). This loss arises by the higher price paid by American consumers due to the tariff.

    The removal of tariffs on imports from S Korea will force American manufacturers to become more competitive and achieve greater efficiency, both which will result in a more efficient allocation of resources in both S Korea and the US. If Ford, for example, sells fewer cars because of in influx of high quality, affordable Korean automobiles, then Ford may be forced to shut down some of its plants in the US. This will lead to the loss of American jobs. However, manufacturers in the US will focus more on capital intensive goods such as industrial equipment, the manufacture of which requires highly skilled labor, which America has in abundance. In addition to industrial equipment and other high skilled manufactured goods, the US service sector should benefit from freer trade with S Korea. So overall jobs might decrease due to plants closing down and so forth but the amount jobs being created in the high-skill service sector of the automobile industry will increase.

    Politicians oppose free trade deals that would result in improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers because politicians are usually only concerned with short term effects which will influence the closest polls. For example, the situation presented is better for America in the long-run because manufacturers in the US will be able to focus solely on capital intensive goods requiring skilled labor, but in the short term, a plant or two might be forced to shut down due to the competition of Korean products. Politicians are only able to see the first steps and not the beneficial shift of focus that US manufacturing will make. But if a hundred people lose their job on a politicians watch, he might not be re-elected, it’s a risk most politicians won’t make.

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21. # theresa.ecslb.f09on 11 Jan 2010 at 6:58 am

    Jack, your example of China's opinion to free trade is interesting and insightful. Because they are not concerned with public interest and there is little direct influence on politicians, the shot term adverse effects aren't the be all end all for a new plan. They are able to have the foresight needed to see a plan all the way through the first stages.

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22. # derek.ecslb.f09on 11 Jan 2010 at 3:17 pm

    1. How does the graph illustrate the concept of “winners and losers from free trade”?

    In the graph, the government is obviously the winner of not having free trade as it has generate additional income. The economy is an example of losers of not having free trade as it has X and Y labelled as deadweight losses.

    2. Who gains and who loses from free trade with the US within Korea?

    The korean manufacturers will benefit as they can sell their products in a foreign country. The US manufacturers will lose as there are substitude goods with a lower price which affects the sales.

    3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    This is because as the most profit can be gained by making such product, more and more resources, including labour will be put into the production and hence creates job

    4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    It is because there is a chance that less jobs will be created in free trade. This is because as the level of production increases, the level of technology will tend to increase. This will improve the poductivity of each factor of production, which less labour as a factor of production is needed for the same amount of products produced.

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23. # derek.ecslb.f09on 11 Jan 2010 at 3:23 pm

    To Jack

    I agree that in the short run ifree trade is bad for the economy but it will gradually improve overtime.

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24. # raphael.echl.f09on 11 Jan 2010 at 7:58 pm

    1. The graph on its own is hard to understand but it does show the winners and loosers like explained below it.

    2. the winners of in South Korea will be the manufacturers and the looses will be those offering service like banking and insurances.

    3. Yes I thinkt that jobs could be made especially in sectors like banking and insurances as they would be the winners.

    4. The politicians probably do not see enough benefits from the free trade agreement so they do not think it would be good to change.

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25. # raphael.echl.f09on 11 Jan 2010 at 8:02 pm

    To derek.ecslb.f09

    In the second question it is asking what will the Skorean loosers be and you talked about the american ones. ANd I agree with your other answers as it was interesting to see how you saw it.

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26. # Laith.ecslb.f09on 12 Jan 2010 at 5:53 am

    The graph illustrates the revenue generated from the tariff, the Korean car sales are hindered by this tariff making them the losers and the winner is the Government collecting the tariff. The Government win because they minimize leakage from their economy by limiting the sales of Korean cars and collecting a tariff from any sales that are made abroad. American industries lose from free trade due to higher competition while the Korean industries win from more sales. Tradition economics means that when money leaks from the cycle the flow of cash becomes less meaning that less people can be funded by the money in the cycle. Leakages lead to less jobs. Free trade increases competition for American producers, considering American companies sponsor the candidates for government the corruption present causes tariffs preventing free trade.

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27. # Alan.ecsla.f09on 12 Jan 2010 at 7:48 am

    1. This graph shows what the effect of the tariff would have on the car market with Korea. It shows who would be the "winner" of such a tariff

    2. Korean car companies, as well as other firms that would plan to import goods into America would benefit from this free trade agreement. Domestic companies, however, would suffer because consumers would begin to buy more from foreign companies, rather than the ones they were buying from before.

    3. The only way a free trade agreement could create American jobs in the long run is if the agreement gave the american companies incentive to improve their products. If they lose too much money, and in turn, make the good they produce more efficient and effective, consumers may demand more of it, leading to more jobs.

    4. Because of the short run of each politician, politicians are trying to do whatever they can to get results in the short-term. Because these free trade agreements take a lot of time to start showing benefits, the politician would suffer by putting one into place.

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28. # Alan.ecsla.f09on 12 Jan 2010 at 7:49 am

    To raphael

    For question 4, I don't think its that politicians really don't see the benefits of free-trade, since its pretty clear what they are, they just don't think they would be able to stick around long enough to see them through.

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29. # Olajumoke.ecslb.f09on 12 Jan 2010 at 10:27 pm

    1. How does the graph illustrate the concept of “winners and losers from free trade”?

    This graph shows that without the use of tariffs, even though efficiency will be increased, either wages in the automobile industry will fall or jobs will be lost. Though it seems like it will help the overall economy, there is no account for the many new people who will then be requiring unemployment benefits due to this new, more "efficient" economy. In India, they continue to refrain from many modern innovations because it would leave too many people jobless in the country, according to the teachings of Gandhi, they would rather have many people working and happy than an industrious nation with unhappy people who are likely to then commit transgressions against the law.

    2. Who gains and who loses from free trade with the US within Korea?

    Those who gain are the other complimentary industries to the automobile industry who would now receive free entrance into the S Korean market. Also, the US consumers would also win because the automobile industry would just become more competitive and more efficient. The main loser would be the automobile industry, they would be forced to think more competitively and become more efficient, this means they would have to work harder to maintain their profit and this is not so desirable to firms.

    3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    Well it is possible that a free trade agreement with Korea would create some jobs, but they would be higher level management jobs and for those with higher educations who would understand how to make deals and understand trade agreements and such. Any of the work which can be done by the uneducated will probably be done in Korea, where labour unions are less evident and people are willing to work for less.

    4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Many countries are opposed to this because the loss of jobs in the USA would actually override the gain. The government's surplus money would then be used for the unemployed, and many government officials have more to gain from the less efficient style of an American based company with little competition than from an actually efficient economy.

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30. # Olajumoke.ecslb.f09on 12 Jan 2010 at 10:46 pm

    1.

    This graph shows that without the use of tariffs, even though efficiency will be increased, either wages in the automobile industry will fall or jobs will be lost. Though it seems like it will help the overall economy, there is no account for the many new people who will then be requiring unemployment benefits due to this new, more “efficient” economy. In India, they continue to refrain from many modern innovations because it would leave too many people jobless in the country, according to the teachings of Gandhi, they would rather have many people working and happy than an industrious nation with unhappy people who are likely to then commit transgressions against the law.

    2.

    Those who gain are the other complimentary industries to the automobile industry who would now receive free entrance into the S Korean market. Also, the US consumers would also win because the automobile industry would just become more competitive and more efficient. The main loser would be the automobile industry, they would be forced to think more competitively and become more efficient, this means they would have to work harder to maintain their profit and this is not so desirable to firms.

    3.

    Well it is possible that a free trade agreement with Korea would create some jobs, but they would be higher level management jobs and for those with higher educations who would understand how to make deals and understand trade agreements and such. Any of the work which can be done by the uneducated will probably be done in Korea, where labour unions are less evident and people are willing to work for less.

    4.

    Many countries are opposed to this because the loss of jobs in the USA would actually override the gain. The government’s surplus money would then be used for the unemployed, and many government officials have more to gain from the less efficient style of an American based company with little competition than from an actually efficient economy.

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31. # Olajumoke.ecslb.f09on 12 Jan 2010 at 10:50 pm

    Response to Raphael,

    For question 2, wouldn't bankers and such actually benefit considering this would open up more opportunities for people and companies to actually invest and take out loans? And the article does say that some people in insurance are actually pushing to have the tariffs dropped. This is due to the fact that they actually do benefit from the lack of tariffs

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32. # Katharine.ecsla.f09on 13 Jan 2010 at 6:21 am

    1. The graph illustrates the concept of “winners and losers from free trade, ” as it shows how the government would gain in the amount of the tariff collected, and the American consumers would end up paying a higher cost due to the tariff.

    2. The winners in Korea would be the manufacturers and workers in Korea, as there will be more jobs and more benefits for them. The losers in Korea would be those would were trying to sell Korean cars in Korea, as the revenue would decrease due to the opening of free trade. The beef producers will lose as well, as the opening up of free trade will allow American companies to export their beef cheaply and gain more.

    3. It could be possible that a free trade agreement with Korea could create jobs in America, however in short terms, more jobs are more likely to be lost due to car manufacturers leaving the country as it would be cheaper in Korea. However, long term could mean that America reallocates their resources and creates more jobs here in different fields, that we are not exporting to other countries. It really depends on how well the situation is handled and how much time has passed.

    4. Politicians oppose free trade deals because they care about their political careers, which usually means how the public views them in the short amount of time that they are in office. Therefore, looking at the big picture is not always ideal for their own benefits, and they feel that manufacturers within America would suffer, and also they could lose political influence if the free trade deal meant loss of jobs during their term in office.

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33. # Katharine.ecsla.f09on 13 Jan 2010 at 6:26 am

    Response to Olajumoke.ecslb.f09,

    I agree that politicians often feel that they must act in a way that is best beneficial for the short run, as that is how long their terms in office are. I think your reasoning that the loss of jobs could override the gain is very probable, and therefore, politicians feel that they must act in a way that benefits people the quickest way possible, which often means not agreeing to free trade deals. It definitely is possible that a free trade agreement with Korea would create some jobs, and I agree that these jobs would require higher educations, for management jobs and the like. It does make it hard on those who cannot afford those advancements in their education, and they are likely to lose their jobs.

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34. # Leyre.ecslb.f09on 13 Jan 2010 at 3:08 pm

    0. How does the graph illustrate the concept of “winners and losers from free trade”?

    The graph shows ‘’tarrifs on koreans automobiles’’. It shows how the pices of American cars remain the same and the prices of Korean cars decrease.

    0. Who gains and who loses from free trade with the US within Korea?

    Korea is benefited in terms of not having to pay taxes for trade. The prices of cars in the US will decrease because they won’t be paying taxes for trading with Korea.

    0. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    In a way this will create but will also decrease the amount of jobs. Because, it may need more people working between the relations between Korea and US, but will also affect the car manufacturers who will have to close.

    Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers

    Because this would affect the economy of their country, since the taxes would not flow as well.

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35. # Kenneth.ecsla.f09on 23 Jan 2010 at 10:34 pm

    1. The graph shows the concept of winners and losers by showing the supply and demand with and without the tariff. With the tariff the demand for the domestic product is greater. With free trade the tariff will be removed, making the demand for the domestic product to drop. The winners with free trade are the foreign companies and the consumers, since the price is dropped.

    2. With the free trade agreement, car companies in Korea will increase sales. Also with this agreement, the beef industry in Korea will lose, since the ban on American beef will be removed and have no tariff.

    3. It is possible that free trade with Korea will create jobs for America. With the new products for Korea needing repairs, the service industry in America will increase. Also if Korean imports force American companies to condense, the people who are left without jobs could be used for other jobs, making it a better allocation of resources.

    4. Politicians oppose free trade deals because in the short term it is harmful to American companies, as it will cost people their jobs.

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36. # Kenneth.ecsla.f09on 23 Jan 2010 at 10:40 pm

    To alan,

    Question 2 is right on, since the free trade agreement is not just based on cars, all other firms will be effected, including the beef industry of korea.

    i dont agree with you regarding question 3 however, i think that if the american people loss jobs do to this agreement, that their resources will be needed in another area, and will potential create jobs.

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37. # diana.ecsl1.f09on 25 Jan 2010 at 10:03 am

    1) How does the graph illustrate the concept of “winners and losers from free trade”?

    The countries imposing the tariffs are losers while the exporting countries are the winners. This is due to the fact that quantity demanded decreases when import taxes need to be paid. According to the graph, “the removal of a tariff on Korean automobiles will result in a decrease in output by American firms from Q2 to Q1, an increase in imports from Q4 – Q2 to Q3 – Q1, and an increase in consumer surplus, efficiency, and better overall allocation of resources in America.”

    –

    2) Who gains and who loses from free trade with the US within Korea?

    If there is greater demand for imported automobiles, US workers will suffer because there will be a decrease in production of American automobiles. However, consumers will benefit as they will not have to pay as much for their cars. Korea also benefits because they gain revenue from the automobile exports.

    –

    3) Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    Yes it is possible. In the short-term jobs will be lost as there will be a decrease in output by American automobile industries. Thus workers will be laid off. In the future however those lost jobs may be relocated in another industry, perhaps relating to car sales or control of exports. So over time it will all balance out and in the long-term jobs will be created.

    –

    4) Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians fail to see the bigger picture and think long-term. The first thought that pops in their minds is that jobs will be lost. That immediately dissuades them from accepting free trade deals. Politicians tend to not be well informed when it comes to economics which tends to be a problem since they can have such influential impacts on the economy. Because they simply do not understand the specifics of economic policies, politicians miss opportunities that result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers.

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38. # diana.ecsl1.f09on 25 Jan 2010 at 10:07 am

    Michael that is an excellent point you made regarding question 4. As you said, many politicians solely care about re-election hence why they focus on the short-term only. This is the sad but simple truth.

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39. # diana.ecsl1.f09on 25 Jan 2010 at 10:09 am

    Alison, great job answering all the questions. You really understand what this article is all about. I love how you outlined questions 3 and 4. Again, it all comes down to short term vs. long term.

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40. # Serafin Kaldis and Ron 20 Apr 2010 at 10:04 pm

    South Korea and America have been struggling to reach a free trade agreement for many years. Since 2003, Korea has stopped all imports due to the Mad Cow disease affecting them from America. However, the beef ban was lifted in 2008, creating some hope for a free trade agreement being reached. It seems like there were other reasons though keeping the agreement from being reached. Apparently the Democrats were afraid that a free trade agreement with South Korea would cost Americans their jobs. If the trade agreement would’ve been reached, the manufacturers in South Korea and the service industries in America would’ve been the winners, while the American manufacturers would have been the losers. However, a free trade agreement would have been a good thing, because it would have forced the American manufacturers to become more competitive and efficient. Even though some jobs would’ve been lost, in the long run America should’ve been better off in the long run. The free trade agreement would’ve done more for improvements in efficiency and resource allocation than it would in harm for a few American workers that were impacted by the greater demand for imported automobiles.

    The removal of the tariff in the graph would create a decrease in output from American firms from Q2 to Q1, an increase in imports to Q3-Q1, and an increase in consumer surplus, efficiency, and resource allocation.

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41. # elijah.echl.f09on 15 Oct 2010 at 1:09 am

    The graph illustrates well the concept of "winners and losers from free trade" in that it shows an inefficient industry being made more efficient, and thus those who profited where they should not have (American manufacturing) will lose money. Those whom were held back will instead now gain a proper amount of profit. In short some people win and some people lose and the graph specifically shows who is making and who is losing money.

    Those who gain from free trade with the US in Korea will be Korean Manufacturing as demand for Korean cars will increase as price can decrease, with sellers being able to bring in the same revenue at a lower price. In Korea some of the service industry will also lose being out-competed by more skilled high-tech American workers.

    A free trade agreement could create jobs in America because it would allow industries that can outcompete Korea (high-tech workers for example) to be able to work more effectively in the Korean market, thus increasing demand and likely increasing the number of people needed to supply that demand

    Politicians oppose free trade deals because in the short-term they can be disastrous for certain industries. If 1 or so percent of the country works in a clogged industry that has no future and is suddenly turned loose to the international wolves of trade, it will do terribly and hemorrhage jobs. This will mean those people will not vote/support the current government. Without the support of the government the politicians cannot remain in power, which is their ultimate objective.

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42. # sara.echl.f09on 15 Oct 2010 at 5:33 am

    1. The graph shows the effects of a tariff of the American car market. As the price of Korean cars decreases and the price of American cars remains stable, it follows that there will be an increased consumption of Korean produced cars. So, the Korean car producers and the American consumers will be the “winners” in this situation, while the American car producers will be the “losers”.

    2. Within Korea those affiliated with the production of cars/car parts would be the winners. Firms which receive a large part of their revenue from the importing of beef from more expensive countries will be the losers. These two statements can be explained by the fact that opening free trade between Korea and the US will serve to decrease the price of cars in the US and simultaneously decrease the price of beef in Korea.

    3. In the short run the free trade agreement between Korea and America will serve to decrease the amount of jobs in the US; however, in the long run it can be said that the opposite will happen as a result of an increase in civil workers and other jobs increases due to the change in the allocation of the US’s resources.

    4. This ties in to the answer of the previous question – short run vs. long run. Because politicians are only in office for a short period of time, they look at the short term results rather than the long run results. Even though these free trade deals have positive long range results such as improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers, they have negative short range results that would not be beneficial for their political careers.

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43. # Mattea.echl.f09on 17 Oct 2010 at 3:57 am

    1.How does the graph illustrate the concept of “winners and losers from free trade”?

    2.Who gains and who loses from free trade with the US within Korea?

    3.Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    4.Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

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44. # Mattea.echl.f09on 17 Oct 2010 at 4:03 am

    1.How does the graph illustrate the concept of “winners and losers from free trade”?

    The graph shows that with a tariff, the production of domestic firms increases. Consumer surplus, however, decreases. This means that with free trade, consumer surplus increases, making them the winners. Domestic firms are the losers as their production decreases.

    2.Who gains and who loses from free trade with the US within Korea?

    Within Korea, manufacturers will be the winners. Because they produce more cheaply than US manufacturers, they will sell more in the US market and increase their profits. The losers will be Korean service industries that cannot compete with US services.

    3.Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    US workers may benefit in the long run. According to the graph, with a tariff, US producers will be overallocating resources to auto manufacturing. With free trade, there will be less workers needed in the US auto industry. Other industries, however, such as service industries, will expand. They will require new workers, creating jobs.

    4.Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Employment opportunities for American workers will increase over the long run with free trade as new industries expand. In the short run, however, manufacturers will be pushed out of the market, and Americans will lose their jobs. Politics operates in the short run; politicians will not focus on long run benefits.

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45. # Mattea.echl.f09on 17 Oct 2010 at 4:08 am

    Sarah,

    You mentioned that in the long run, American workers will benefit as new industries will arise from the re-allocation of resources. The issue is, will workers who previously worked on a car assembly line really be able to trasfer easily to a job in a service industry? It will take time and money to retrain all of these workers. This is one disadvantage of free trade; labor is not a very flexible resource, and may not be reallocated so easily.

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46. # Trevor.echl.f09on 17 Oct 2010 at 7:33 am

    1. The graph has a few notable features that indicate winners and losers. It shows, first of all, that the losers from free trade would be the U.S. automobile manufacturers. If tariffs were removed the then the supply level would be at Sworld. What this would mean is a lower quantity supplied and a higher quantity demanded. The manufacturers would be farther from reaching a preferred equilibrium. This discrepancy is made up by one of the winners: the foreign automobile manufacturers. They find that they can make up for this and provide a certain number of exports to Americans for profit. Another winner in this scenario is the American consumers. They can obtain cheaper cars. Another loser is the U.S. government because they revenue from the tariff that they would otherwise get

    2. The winners in Korea who benefit from free trade are mostly the automobile manufacturers. They can now provide cars to more markets than just their own. This is sure to generate profits for them. One of the big losers is the industries in Korea which will be displaced by U.S. competition (for whatever good the U.S. has a comparative advantage in). Another loser is the government because they will not be able to raise revenue from a tariff. Korean consumers will benefit, though.

    3. It could. This would happen if the number of jobs open as a result of expanding the market for services to Korea created more net jobs than were lost by the closing of automobile plants. This would assume, though, that workers could immediately translate over into these jobs. There are the obvious problems in frictional unemployment which could make this impossible, however. Who knows…?

    4. There’s always the risk of such agreements backfiring. What if the economy is not able to adjust? What if businesses then have to shut down and move their operations overseas? The politicians will be blamed for instituting the free trade agreement. This will be a valid claim for people to make. Individual businesses may shut down and workers may still find themselves out of a job.

    Trevor Tezel

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47. # Trevor.echl.f09on 17 Oct 2010 at 7:40 am

    Mattea,

    I forgot to mention what you did on the point of consumer surpluses. This is a very good indication of the problem that U.S. consumers face with a tariff. This consumer surplus definitely shows that without any tariff, consumers are better off. This also reminded me of the deadweight loss. This is lost to the whole economy and shows that the whole economy loses a little bit when a tariff is in place for this reason.

    I also wholeheartedly agree with you on the point of politicians only being concerned with the short-term. At the same time, it is debatable on whether or not in the long-term workers will finally settle in these new jobs.

    Trevor Tezel

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48. # daniel.echl.f09on 17 Oct 2010 at 1:57 pm

    1.How does the graph illustrate the concept of “winners and losers from free trade”?

    The graph clearly highlights the winners and losers of free trade. In this scenario where the tariffs are taken away we would see that the biggest winner is that of the consumers. They will be able to obtain cars of a greater variety and cheaper cost. The market will become more competitive with greater substitutes making the price remain low. The losers in this case would be firstly the American automotive market as they were Able to charge an increased price due to the tariffs but now they cannot and will have to compete with the lower priced cars from Korea. Another loser of the government ad they will not receive any off the revenue from the tariff payments and we may see a loss in jobs which would lead to a decrease in taxes.

    2.Who gains and who loses from free trade with the US within Korea?

    The major winner in Korea will be the automotive market as they will see that the tariffs have been reduced and therefore they can sell there cars more competitively. This will mean that a greater volume will be sold and they will have an increase in sales revenue. One of the losers on the other had would be markets in which the US have a comparative advantage in that market and so we would see that the American markets will be more effective in these areas and would lead to a loss of jobs in these areas. The government will lose out due to no tariff payments from the imports from the US market.

    3.Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    This is possible but improbable. This could be possible as the increase in jobs in the US markets that had a comparative market was greater than the loss in the automotive industry than this maybe possible. None the less the US will gain in highly skilled industries and therefore it is not easy to develop these skills and workers maybe resistant to do so and therefore there is frictional unemployment.

    4.Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politics is a very difficult area with parties constantly having opposing views and therefore we see that most ideas put forward will have some sort of oppositions. The reason why they would oppose this would be if this was to cause the overseas productions of cars and the shutting down of American businesses then the politics take the blame and the party will not be voted back in therefore there is a lot of self interest. Politicians work with in a small time frame usually the period in which they are in power and a agreement like this would see the loss of many jobs in the short run and therefore is bad for the image of the party.

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49. # daniel.echl.f09on 17 Oct 2010 at 2:05 pm

    Trevor,

    good response to the questions i think you made it very clear of the winners ad losers of free trade. Its interesting to see that the government in both situations seem to be losers and this brings to the for ground whether it is advantageous for the country. I think your point about politicians and responsibility is very true they never want to take a risk in the case of losing power and therefore there is a lot of self interest behind all government decisions which again makes you consider whether they are making the decisions for the people and themselves. I find politics very controversial and we can see this in this situation. I think that for question 3 the answer is very unknown and that only time will tell some of the benefits and will be subjugated to many other factors.

    Dan

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50. # Eline.echl.f09on 18 Oct 2010 at 9:57 am

    1) Though the graph represents the effects of a tariff on the US car market, it is possible to look at what happened before the tariff was imposed. So before the tariff was levied, and even before there was free trade, US car producers sold their products for price Pd. Then, as we can see on the graph, free trade was introduced and the US car producers were obliged to force down their prices to Pw in order to compete with the cheaper prices of foreign firms, and at that price were only willing to produce at Q1. Regarding this drop in their prices, it is clear that US car producers were the "losers" of free trade in this case. US consumers, on the other hand, were the "winners" as they would purchase their cars at the lower price Pw.

    2) South Korea's manufacturing and automobile industry will gain from free trade with the US. Without any barriers, these South Korean industries will be able to sell their products in the US at lower prices than those of US products, and as a result will have more demand for their products. Thus they will achieve higher profits. Also South Korean workers would be advantaged by South Korean service sectors would probably lose from the free trade agreement considering the competition from the US service sector.

    3) It is possible that the free trade agreement would create jobs in America. The expansion of the service sector to fulfill Korean demand as well as domestic demand will create new jobs.

    4) Improvements in efficiency, allocation of resources, and new employment opportunities all happen in the long run. In the short run, however, free trade might result in the loss of domestic jobs. Voters are often more concerned with what is happening in the short run than in the long run. Therefore politicians, attempting to stay in favour with the electorate, will prioritize the short run over the long run consequences of certain policies. This is why they will oppose free trade regardless of its long run benefits.

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51. # Eline.echl.f09on 18 Oct 2010 at 10:19 am

    Daniel,

    I completely agree with your point about the government being a "loser from free trade" as well. Also interesting what you said about the possibility of frictional unemployment arising. However, I wouldn't call it "frictional" but rather "structural" unemployment. Frictional unemployment refers to people in between jobs or people that have just left education, whereas structural unemployment occurs when skills demanded by the labour market are not the same as the skills available from the unemployed. I believe that workers who lost their jobs in the automobile sector will most likely not have the skills to work in the service sector and are consequently structurally unemployed.

    -Eline

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52. # Laura Yilmazon 18 Oct 2010 at 10:32 pm

    1.The graph shows the effects of the tariff in the USA car market.

    2.In the graph is easy to easy how will win if the tariffs disappear (the consumer will have to pat lees, the Korean companies will be able to sell more and other companies which are not from this sector will be benefited by the money that the USA people has now to buy other things because the car is cheaper) and how lose with this (the USA car companies that has to decrease a lot their prices losing a lot of revenue.

    3.This is possible but improbable. This could be possible as the increase in jobs in the US markets that had a comparative market was greater than the loss in the automotive industry than this maybe possible. None the less the US will gain in highly skilled industries and therefore it is not easy to develop these skills and workers maybe resistant to do so and therefore there is frictional unemployment.

    4.Politics is a very difficult area with parties constantly having opposing views and therefore we see that most ideas put forward will have some sort of oppositions. The reason why they would oppose this would be if this was to cause the overseas productions of cars and the shutting down of American businesses then the politics take the blame and the party will not be voted back in therefore there is a lot of self interest. Politicians work with in a small time frame usually the period in which they are in power and a agreement like this would see the loss of many jobs in the short run and therefore is bad for the image of the party.

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53. # Laura Yilmazon 18 Oct 2010 at 10:35 pm

    Trevor,

    Its interesting to see that the government in both situations seems to be a looser and this brings to the for ground whether it is advantageous for the country.

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54. # elijah.echl.f09on 18 Oct 2010 at 11:28 pm

    Tevor:

    It's interesting that you have the governments as being the collective losers of this dynamic. The fact is if you follow this logic I'd argue that often the governments are the losers to "proper capitalistic" thought and as such have not motive to adopt it. On this basis, if one carries it through to the end would the governments implement policies that personally were negative to it? In effect, are governments really beholden to the interests of their people? To carry that line of thought even farther would some of these transactions not be more efficient if government did not exist at all? Could an anarchist capitalist system work?

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55. # masayaechlf09on 19 Oct 2010 at 5:36 pm

    1. How does the graph illustrate the concept of “winners and losers from free trade”?

    The graph illustrates the concept of "winners and losers from free trade" because it clearly shows the outcome of imposing tariffs on Korean automobiles. When tariffs are imposed on the Korean automobile, the domestic demand for Korean cars decreases and domestic supply for American automobile rises. In this case, the winner is the American car and the American government, while the losers being consumers who have to pay the higher price for Korean automobile and Korean manufacturer who experience loss of supply.

    2. Who gains and who loses from free trade with the US within Korea?

    In economic theory, both country should gain from the free trade because Korea is able to expand its area of operation and gain revenue from exports. US could also gain, in theory that is, because the entry of foreign firm in the economy, enforces an increase in competition. However, in reality, it is more likely that Korean manufacturer will gain more because their cars are more affordable compared to American cars.

    3. 3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    As mentioned before, free trade agreement with Korea potentially create job in American because the increase in competition encourages greater economies of scale and expansion of the industry's structure. Nevertheless, it is more likely to lose job because the Korean automobile company would push out weak domestic car manufacturers out of the market.

    4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources and even in the employment opportunity for American workers because shutting down of domestic firms may be blamed on the politicians who let the free trade agreement go through. If they are blamed, they are less likely to be reelected for position. In addition to that, large US automobile producers have close links to politicians.

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56. # masayaechlf09on 19 Oct 2010 at 5:39 pm

    @Laura Yilmaz

    In addition to what you have said, most conservative politicians have strong connections to the US automobile industry. In my small research, General Motors contributed $802,414, with 52 percent of that amount going to the Democrats and 48 percent to the Republican… Surely this funding of corporations to politicians have to do with their opposition to free trade.

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57. # chamonix.echl.f09on 20 Oct 2010 at 2:46 am

    1. This graph shows the "winners and losers" of free trade because it illustrates that without the tariff, American Auto Producers will lose customers and see a drop in prices. This will make them the "losers" as it will cut their ability to produce. Consumers are the "winners" here as they will have greater market diversity and cheaper prices.

    2. Within Korea, the Korean automobile industry will gain from free trade as both Korean and American consumers will be more likely to buy Korean cars because they are produced more efficiently and at a lower price. Korean consumers will also gain because they will be able to purchase more goods at lower prices. Korean workers in the service sector, in which the United States is strong, will lose some of their revenue as Koreans gain more access to US Services.

    3. A free trade agreement could create jobs in the United States by encouraging the growth of some markets. While many workers in the auto industry might lose jobs, the growing service sector could lead to increased jobs in these areas.

    4. Politicians oppose free trade measures because, while they may help the whole nation in the long run, they hurt individuals in the short run. The US might benefit from free trade in several years, but the immediate effect would be thousands of auto workers in a nation already experiencing a regression losing their jobs. Unions often make manufacturers well-politically organized groups and therefore they have some degree of control over the government.

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58. # chamonix.echl.f09on 20 Oct 2010 at 2:52 am

    Hi Trevor,

    Great post, as usual!

    I really liked how you noted that frictional unemployment can be a barrier to the efficacy of free trade. I think that that's one of the biggest flaws of the model–it assumes that people can go from being mechanics to farmers overnight. It also assumes that firms have the capacity for this. Building new factories or cultivating new land can take a long time–and that can make free trade less beneficial than it sounds.

    It also tied in with what you said about politics being focused on the short-run. Didn't we read a quote last year (maybe on this blog, actually) that said something like "We are short-term creatures living in a long-term world"? I think that applies to the interaction between politics and economics perfectly: politicians have to deal with how things look, while economists care about how things work.

    Thanks for the interesting post,

    Chamonix

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59. # Dennis.echl.f09on 20 Oct 2010 at 11:05 am

    1. The graph illustrates the concept of winners and losers from free trade as it shows the effects of a tariff of the American car market. As the price of Korean cars decreases and the price of American cars remains stable, it follows that there will be an increased consumption of Korean produced cars. Thus, the Korean car producers and the American consumers will be the winners in this situation, while the American car producers will be the losers.

    2. Those affiliated with the production of cars/car parts within Korea would be the winners. Firms which receive a large part of their revenue from the importing of beef from more expensive countries will be the losers. These two statements can be explained by the fact that opening free trade between Korea and the US will serve to decrease the price of cars in the US and simultaneously decrease the price of beef in Korea.

    3. In the short run the free trade agreement between Korea and America will serve to decrease the amount of jobs in the US, however, in the long run it can be said that the opposite will happen as a result of an increase in civil workers and other jobs increases due to the change in the allocation of the US’s resources.

    4. Because politicians are only in office for a short period of time, they look at the short term results rather than the long run results. Even though these free trade deals have positive long range results such as improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers, they have negative short range results that would not be beneficial for their political careers.

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60. # Dennis.echl.f09on 20 Oct 2010 at 11:11 am

    Hey Chamonix,

    I like what you have to say about the politicians' response to free trade measures and I agree that they are certainly only interested in the short term results. After all, where else are they going to win over a constituency? Not in the long run..And its also very true that labor unions, which would be most affected by free trade measures, have quite some political influence. All in all, I think I can say we agree here.

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61. # Ralph.echl.f09on 23 Oct 2010 at 4:35 am

    How does the graph illustrate the concept of “winners and losers from free trade”?

    The graph shows this by its certain sections that are left on the graph, when we start adding the quantity lines in. We start getting triangles, that will state different things, such as what revenue a certain country will get from implementing tariffs as well as losses.

    Who gains and who loses from free trade with the US within Korea?

    Economic theory suggests that both countries would benefit. As the competition would increase productivity, and efficiency. As stated above in the article, the Korean manufacturers will benefit, as the reduction in tariffs make them more competitive and American automotive companies will have to respond.

    Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    Both countries are winners and losers yet it ties back into short term and long term. Car producers will benefit as, consumers will buy their cars in the short term, as import would decrease. Yet over short term if there was free trade agreement, it would cause employees to lose their jobs, but the response would be increase efficiency in the supplying of resources.

    Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians are probably worried about the short term affects, as a president you only have to lose a certain percentage of support and it could lead to your downfall. Obama is a great example of recent examples, he has had to take some major economic decisions, decisions that have not pleased others.

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62. # Ralph.echl.f09on 23 Oct 2010 at 4:44 am

    Hey Chamonix and Dennis,

    Agree with your answer for question four, I believe the same. Politicains would like to think long term, yet prefer short term as it will affect their reputation. Its selfish but then again its human nature.

    Like or Dislike: 0  0

63. # Armando.echl.f09on 31 Oct 2010 at 12:06 pm

    1) The graph shows the effects of a tariff of the American car market. As the price of Korean cars decreases and the price of American cars remains stable, it follows that there will be an increased consumption of Korean produced cars. So, the Korean car producers and the American consumers will be the “winners” in this situation, while the American car producers will be the “losers”.

    2) Within Korea, manufacturers will be the winners. Because they produce more cheaply than US manufacturers, they will sell more in the US market and increase their profits. The losers will be Korean service industries that cannot compete with US services.

    3) It is possible that the free trade agreement would create jobs in America. The expansion of the service sector to fulfill Korean demand as well as domestic demand will create new jobs.

    4) Because politicians are only in office for a short period of time, they look at the short term results rather than the long run results. Even though these free trade deals have positive long range results such as improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers, they have negative short range results that would not be beneficial for their political careers.

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64. # Armando.echl.f09on 05 Nov 2010 at 1:16 pm

    Chamonix,

    Its tru what you mentioned about the politicians’ response to free trade measures and I agree that they are certainly only interested in the short term results. Also that labor unions, which would be most affected by free trade measures, have quite some political influence.

    Like or Dislike: 0  0

65. # marcelo.echl.f09on 10 Nov 2010 at 6:52 am

    1. How does the graph illustrate the concept of “winners and losers from free trade”?

    Without free trade, with the implemented tariffs, domestic firms enjoy higher production, while the consumer surplus decreases. Conversely, with free trade, consumers would be the winners, as their surplus increases and firms the losers as production decreases.

    2. Who gains and who loses from free trade with the US within Korea?

    Well, as Korean firms produce more cheaply, they will be the winners in the US market. However, as Korean services cannot compete with american services, they will lose.

    3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    Though jobs in auto manufacturing will disappear, US workers will benefit in the long run, as other industries such as the service industries will grow, requiring new workers.

    4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians are short-sighted: though in the long-run there are benefits, politicians only perceive the short-run losses.

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66. # marcelo.echl.f09on 10 Nov 2010 at 7:00 am

    Armando,

    I certainly agree that politicians are only interested in short-term results: the reason is that they do not want to lose popularity, which might be lost if the public do not see the long-term results.

    Like or Dislike: 0  0

67. # Issa.echl.f09on 11 Nov 2010 at 8:02 am

    1) How does the graph illustrate the concept of “winners and losers from free trade”?

    The graph shows shows how much consumers benefit from free trade by showing the decreased prices and increased demand caused by the significantly lower global prices. This also illustrates how how much domestic suppliers lose in a free trade situation, as the quantity they supply at the significantly lower prices decreases. The winners and losers of free trade are further illustrated by the representation of how the implementation of a tariff would effect the situation. The deadweight loss and over allocation of domestic resources that is shown by the representation of the tariff on the graph, serves to further stress how much consumers and the world in general in terms of efficiency sake win from free trade. This also shows further how the domestic producers lose.

    2) Who gains and who loses from free trade with the US within Korea? Korean producers of the goods in which Korea has a comparative advantage benefit. The market for these goods is increased by free trade and therefore production increases increasing jobs in this area. The producers of goods and services that require higher levels of skill and are more capital intensive may be more efficiently produced in the US. Therefore, these producers and employees of these firms are the losers of free trade, as resources are reallocated to other areas of production. They also lose because of the decreased demand for their goods.

    3) Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    It is possible because free trade with Korea should increase demand for the goods in which the US has a comparative advantage. This means that although jobs might be lost in less efficient industries, more resources could be allocated to the ones that country is better suited to specialize in. This has the potential to create new jobs that are more sustainable, as they are in rowing industries.

    4)Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians are interested in obtaining and maintaining their positions as elected officials. Therefore, they have to comply with the will of their electorate. Many of these people need jobs now, and aren't interested in the jobs that might be created 2 years from now if they are currently unemployed. Their current job issues take precedence over vague ideas of improved efficiency and distant jobs.

    -Issa

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68. # Issa.echl.f09on 11 Nov 2010 at 8:08 am

    @ Marcelo,

    I really like how you were able to provide short, succinct answers to the questions. However, I feel as if your answer was overly simplistic and portrayed politicians in a purely negative light. The question asked specifically about opportunities for American workers. Therefore I'm assuming it is referring to politicians in the US. The framework that politicians in the US exist in may make it difficult for them to act in "long-sighted ways". The politicians themselves might not be inherently "short-sighted".

    -Issa

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69. # Nabil Elbehrion 14 Oct 2011 at 12:43 pm

    1) How does the graph illustrate the concept of “winners and losers from free trade”?

    The graph illustrates the concept of “winners and losers from free trade” because it shows the effects of a tariff on the American car market. As the price of Korean cars decreases and the price of American cars remains the same, there will be an increased consumption of Korean produced cars. The Korean car producers and the American consumers will be the “winners”, while the American car producers will be the “losers”.

    2) Who gains and who loses from free trade with the US within Korea?

    Both America consumers and Korean automobile producers will benefit from free trade but American automobile producers will lose because they will lose demand for there products and possibly lose their jobs. American consumers have to pay more because of the imposed tariff. The graph shows that the removal of the tariff on Korean automobiles will reduce production by American firms and increase in imports and an increase in consumer surplus, efficiency. American automobile workers could lose their jobs but on the macroeconomic level it is a positive move for the USA.

    3) Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    With higher competition in the automobile industry there is a possibility that new jobs will be created to assist in the resurgence of that industry. There is a possibility that other industries will also benefit from the increase in consumer surplus and efficiency.

    4) Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians oppose free trade because in their districts or constituencies the immediate loss of jobs will dramatically effect their re-election and in order to maintain their office they need to oppose such job loss even if it is better for the country as a whole.

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70. # Merve Akpinaron 14 Oct 2011 at 1:56 pm

    1) How does the graph illustrate the concept of “winners and losers from free trade”?

    This graph illustrates the concept of tariff in the USA cars.

    2) Who gains and who loses from free trade with the US within Korea?

    By looking at that graph we can comment on who is loser who is winner. In this graph we can see that people will buy more Korean cars in USA since it is cheaper. Consumers are winners in that case. But by the help of tariffs there will not be dumping, therefore domestic producers will not suffer from that. By the help of free trade, competition will increase and it will make price shift down to Pworld and people will buy the cars from the most efficient Korean producers. So we can say that car producers and the consumers will be the winners. But the beef importers will be losers of that trade.

    3) Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    We can evaluate that situation in short and long run separately. Even if the tariffs will take place in that trade some of the domestic producers will not be able to compete with Korean car producers, they will be out of work. That means most of the people will be unemployment. Because in the short run American producers will lose some of their revenue. But in the long run, more jobs will be created, as result of increase in diplomats, representatives and staff will be needed to handle the increase in American and South Korean diplomacy.

    4) Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians oppose free trade deals that would result in such improvements in efficiency because this efficiency can only appear in long run. That cannot be good when we consider the self advantage of politicians; since elections take place in short run, society consider the success of short run, they usually do not care the long run. And this trade will be beneficial in long run. That is why politicians oppose it.

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71. # Merve Akpinaron 14 Oct 2011 at 2:01 pm

    @ Nabil Elbehri

    Hi Nabil,

    I really liked your comment, we almost same idea about the topic. But the way you express it is really good.

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72. # Brian Maloneon 14 Oct 2011 at 7:20 pm

    - This graph displays the economic effects that the tariff placed US cars.

    - As shown in the graph, consumers will now buy Korean cars as it is cheaper. Consumers would benefit because they would pay less, as the price would have decreased due to higher competition from foreign companies, forcing domestic producers to charge less. These foreign producers would also benefit from free trade because tariffs have made American cars cheaper for Americans; with no tariffs consumers would have more choice, which would damage America automotive manufacturers.

    - There are two ways in which this agreement could create jobs in America. The first is that American manufacturers would be forced to use their resources as efficiently as possible, meaning that marketing would be more important. Jobs would be created in these areas which would help to lower the amount of jobs lost. The other way in which jobs would be created would be the jobs that control these exports.

    - Politicians oppose these deals because the benefits are mostly long-term and those who want to be elected only focus on what the voters want to hear short-term.

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73. # Brian Maloneon 14 Oct 2011 at 7:24 pm

    @ Merve Akpinar

    Hi Merve,

    I thought your point about an increase of diplomats would be needed was a very good one. I only thought about the jobs within the US and not American jobs in other countries.

    - Brian

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74. # Jaime Ariason 16 Oct 2011 at 4:44 pm

    • How does the graph illustrate the concept of“winners and losers from free trade”?

    Because it shows that consumers will buy more S. Korean cars which will mean that spending within the US is lower.

    • Who gains and who loses from free trade with the US within Korea?

    I believe US will lose and S. Korea will gain.

    • Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    Yeah it is possible; because firms will search for higher qualification workers which will keep their company on the top. It will make people work harder and specialized in more stuff in order to get a job.

    It is also true that some jobs will be lost because the new people hired will substitute old people with not such good qualification.

    • Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    I believe there are 2 reasons.

    First reason is political; there is not a party that will help its competitor for the power.

    If the Republicans were about to sign the Agreements the democrats will probably oppose it so that it is not the Republicans who win; because a movement like this could balance the next elections in the side of Republicans.

    A second reason it is in my opinion a social; issue; no one wants to be shown that another country is better at something that you have been doing for ages. An example: Spain produces wines since it exists as a nation or territory. If now Vietnam who never produced wines started to produce cheaper but better wines which are imported on Spain, Spanish producers wouldn’t be happy about that.

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75. # Nesibe Zirzakiranon 17 Oct 2011 at 7:45 am

    1. How does the graph illustrate the concept of “winners and losers from free trade”?

    As the price of Korean cars rise, the price of American cars remains stable and the American consumption of Korean cars increase. In that graph, Korean car manufacturers and American consumers are winners and American manufacturers are the losers of tariff. American car are more expensive for the consumer, whereas Korean cars are less expensive and therefore demand for them rises.

    2. Who gains and who loses from free trade with the US within Korea?

    Korean automotive sector will be the winner due to increase in consumer purhasing power for cheaper Korean cars in US market in the free trade between US. US will be the winner of beef trade with Korea as beef of US markets are demanded more in Korea.Both sides will gain high profits . The losers are obviously US car manufacturers in domestic market and beef producers in Korean domestic market as they will have umemployments in the short run.

    3.Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    In the short run the US car industry will have to be laying-off workers and facing increasing rate of unemployment due to Korean car imports to domestic market. However, in the long run the reverse will occur as US domestic firms will lead their resources to be allocated in different production sectors instead of car and it creating more job opportunities.

    4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians oppose because the citizens want to see the short-run situation and in the short run , this trade leads unemployment which is a negative element for elections. They are aware that this trade is beneficial in the long run but in order to be elected the short run matters.

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76. # gökçe g&on 17 Oct 2011 at 7:46 am

    1.The effects of the tarif in the USA car market shown in the graph. .

    2. By the help of the graph it is obvious to see the how rill win if the tariffs disappear. the consumer will have to pat lees, the Korean companies will be able to sell more and other companies which are not from this sector will be benefited by the money that the USA people has now to buy other things because the car is cheaper and how lose with this the USA car companies that has to decrease a lot their prices losing a lot of revenue.

    3. The free trade most probably will destroy some jobs in the car sector but it will create other jobs I mean; the civil servant that control the exports and all that new job that the companies of other sector in which the people spend more money because the haven’t spend it in the car

    4. Since all that benefits that the people will receive are in the long run but all the problems are in the short run (and the democracy government do not like this because the election are in the short run)

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77. # gökçe g&on 17 Oct 2011 at 7:47 am

    @nesibe zirzak?ran

    ? think your approach to the third and fourth question is really logical..

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78. # Nesibe Zirzakiranon 17 Oct 2011 at 7:48 am

    # Merve Akpinar

    I liked your approach to the 3rd question. I never thought about the diplomacy between US and Korea would result in a cure for unemployment.

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79. # Nesibe Zirzakiranon 17 Oct 2011 at 7:51 am

    # Nabil Elbehri

    I really appreciate that you consider the 2nd question with referring the graph and evaluating from that.

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80. # Ece ERDEM (eerdem)on 17 Oct 2011 at 7:54 am

    1. According to the graph that was drawn, it is obvious that there are winners and losers as a result of free trade. This can be understood by looking at the green & yellow boxes. There are tariffs that are applied on the products that are imported from Korea, and this hurts the American consumers, because the prices are too high. However, this will benefit the government because they are collecting large amounts of taxes from the products.

    2. The winners of the Korean economy would be the workers and the manufacturers because there are more job benefits and more opportunities for them. Because of the free trade, the Korean sellers of cars will be the losers, also the beef producers in Korea will also lose because now the American industry will export their beef at cheaper prices. Both governments of the two countries will gain due to the increase in the tax revenue.

    3. In the long term, the free trade between Korea and the USA will create jobs in the USA. However, in the short term the jobs can be lost because American automobile industries will produce less output therefor they will be unemploying people. But in the long run with the reallocation, people will get the chance to have jobs again.

    4. When making these comments, the politicians tend to think in terms of short term other than long term. In short term, they are right because public will react and this will freak the politicians out. By considering only the short term, the politicians won’t be able to see and improve the efficieny.

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81. # Ece ERDEM (eerdem)on 17 Oct 2011 at 7:57 am

    To #Nesibez?rzak?ran

    I like your point about the politicians thinking of the society wanting to see the short term effect, that's why they sometimes lack interest of the long term effects because rather than thinking like an economist, they basically play the role of the politican.

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82. # Asucan Odcikinon 17 Oct 2011 at 7:59 am

    1) The graph illustrates the winners and losers as it shows the outcomes of imposing tariffs. According to the graph when a tariff is imposed on Korean cars, there will be less demand for Korean cars in the market. Because of this reason the supply of American cars increases. From this scenario we can conclude that the winner is American car producers and losers are consumers who have to pay more amount of money in order to purchase Korean cars.

    2) With the free trade between Korea and the USA, Korea will definitely gain more than the USA. Because by the help of free trade Korea will export more cars and as their price of cars are cheap they will be demanded more in the market of America. So within Korea, there will be more production in car industry which can create more job opportunities. On the other hand, if we look at the effects of free trade on the USA, even if the free trade should be beneficial for both of the countries in theory, for the USA the case will not be so good. Because there will be competition in the car market between domestic producers and foreign producers as prices of Korean cars are very cheap. In this case, American car industry will definitely lose as they will not compete with the lower price in the market.

    3) In theory it can create job opportunities in the USA but it is very hard. As there will be more competition in the car industry because of lower prices of Korean cars in the car market of America. Because of that reason, in order to increase the efficiency in production domestic producers in America could increase their numbers of workers which means creating new job opportunities. However, it is just a very optimistic possibility because in these cases usually weak domestic producers cannot compete with the foreign producers who produce the same good at lower price. That’s why they choose to lay off workers to be able to compete with them.

    4) All of the benefits listed in the question especially the ones about consumers, can be effective in the short run. But if we think of the long run the politicians can be right about opposing the free trade agreements. Because in the long run the lower prices in the market can affect the domestic producers badly. They have a risk of not being able to compete with the low prices that’s why there is a huge risk for domestic producers to lay off workers. This means that the unemployment can rise and even the firms can choose to shut down which means decrease in domestic economic production. These two long run effects cannot be accepted by the government and politicians as the effects do not fit the macroeconomic aims of an economy.

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83. # Asucan Odcikinon 17 Oct 2011 at 8:02 am

    @Jaime Arias

    Hey Jaime,

    I think your answer for the 4th question is really interesting. I liked the way you divide the answer in two parts. However, I think you should also consider the macroeconomic aims of a country while discussing the decision of politicians.

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84. # Behiye Dasdemiron 17 Oct 2011 at 8:21 am

    1. How does the graph illustrate the concept of “winners and losers from free trade”?

    By looking at the quantity demanded and the changes in the price, the winners and losers from free trade can be interpreted. The changes in the price and the quantity shows some dead-weight loses. The region Y shows the inefficiency of the domestic products since more resources are used. Moreover, the region X shows the deadweight loss from the consumer loss as that area is not demanded anymore. Furthermore, the graph shows the increase in the total revenue of the domestic firms and the loss in the total revenue of the exporting country. Also, it is observed that the country benefit from the tariff revenue gained from trade.

    2. Who gains and who loses from free trade with the US within Korea?

    When there is tariff imposed, the domestic firms in the US benefit from the decrease in the imports from S Korea and increase in the domestic total revenue. At this juncture, S Korea seems to have a loss their revenue from the exports from the exports to the US. However, there are some dead-weight losses which the US has. For instance, there is a dead-weight loss due to a decrease, the consumer surplus. Moreover, there is inefficiency in the resources.

    3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    If the tariffs are eliminated on Korean cars in the US, the competition among the domestic firms would increase. However, loss in the profits may lead the firms to lay off workers, diminish their resources, or even shut down. Since the prices of Korean cars would be cheaper, the domestic output would decrease. That is why; in the short-run the new job opportunities may not be offered. On the contrary, the domestic would like to compete with the Korean imports; that is why, the firms which the US has comparative advantage over S Korea would increase their profits and exports. Then the more job opportunities will be created.

    4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    The politicians disagree because of the fact that the benefits from the deals would be evident in the long run. However, in the short run, the citizens would suffer from the lack in the job opportunities and the domestic producers would suffer from dumping. Since the political actions are significant for the elections, the politicians would like to take actions of which the results would be observed in the short run.

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85. # Behiye Dasdemiron 17 Oct 2011 at 8:25 am

    #Ece Erdem

    I totally agree with you on your third answer. You stated that since the policitians dont tend to have the deal because of the the short run effects, the unemployment would increase more in the long run unless the deals are made.

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86. # Muhammet Murat SEKBAon 17 Oct 2011 at 3:17 pm

    We can understand from the graph that the effects of the tarif in the USA car market. It shows the winner and losers of the free trade. According to the graphs we can see that people will buy Korean cars more than Americans because they are cheaper.

    According to graph we can say that the loser of free trade between the USA and Korean is Americans. Because S. Korea many producers would make more profit, because they may offer the cars at a cheaper price so that Americans would prefer their cars.

    Yes it could be possible that a free trade agreement with Korea could create job opportunity in America, especially in the long term. E.g. the service industry for Korean products may increase in America.

    Politicians are against the free trade because in the short term it has really significant effects on the American companies. E.g. the most importantly people will lose their jobs.

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87. # Muhammet Murat SEKBAon 17 Oct 2011 at 3:18 pm

    @Behiye Dasdemir

    I agree wtih your thir response as you said in the short term citizens will be affected mostly.

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88. # k.zurabishvilion 17 Oct 2011 at 3:26 pm

    Blogosphere

    1) the graph below shows that the demand for domestic cars will lower if the tariff is removed, its obvious that workers of domestic manufacturers will lose jobs their jobs and Koreas manufacturing for US cars will go up, thus the graph shows that US automakers will lose and Korea will Increase their production. Thus this shows the winners and losers from free trade.

    2) Us is a second larges exporter market exporter in S Korea, so the free trade would eliminate/reduce tariffs which would give those three areas ( automobiles, vegetables and electronics) will enhance them : increase production, boost market. If this opens up in Korea losers will be the beef industries in Korea which would have to compete with the prices of US beef producers.

    3) According to the microeconomic theory, American manufacturers will find benefit in the long run, by becoming more competitive and achieving better efficiency. Goods will be produced more like : industrial equipment, the manufacture of which requires highly skilled labour, high skilled manufactured goods which in future might require more workers to be more competitive, ( I think that jobs might be created. )

    4) in the automobile making industry jobs will be lost, in addition to that this situation is more political rather than economic. So the political situation might be a barrier and more important for the politics rather than economic improvements.

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89. # Mehmet_Mert_Sumaon 17 Oct 2011 at 5:59 pm

    1.The graph illustrates that the removal of tariffs will lead to the increased supply of Korean cars and cheaper prices in the market. The supply of the domestic manufacturers will fall in the markets. So, the winners are the Korean producers, the consumers and the service companies in the U.S.. The losers are the US manufacturers and the people employed in the field in the U.S.

    2. Car manufacturers are the winners in the Korea after the trade. They will have the demand of the U.S. consumers, as well. Service companies in Korea will suffer after the trade because service companies in the U.S. will be more significant. The domestic beef suppliers in the country will face losses after the beef ban is removed. They will compete with the U.S. producers and share their revenue, but service companies of beef in Korea will benefit from the agreement.

    3. In the short run, the structural unemployment will increase in the U.S. because the field such as car manufacturing will no longer be able to compete with the foreign producers. The structural unemployment will cause social costs in the short run. However, if the country is able to face the social costs in the short run, people will able to change their job fields in the long run. The service sector will grow and highly skilled labor of the U.S. will find jobs.

    4. As I said in the previous question, politicians may not dare to face social costs in the short run because their popularity can be seriously harmed by their decision leading to many people unemployed in the short run. It is hard for a politician to get votes with the promised jobs of future. So, the politicians care about the short run instead of the long run.

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90. # Mehmet_Mert_Sumaon 17 Oct 2011 at 6:04 pm

    @# k.zurabishvili

    I don't think the U.S. producers will be able to become more efficient and compete with the Asian producers because the principal superiority of Asian producers is the low wages they pay. The U.S. producers will never be able to reduce their production cost to challenge Asian producers, if the wages in Asia remain at this level.

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91. # Dilan Guneson 17 Oct 2011 at 6:09 pm

    1.How does the graph illustrate the concept of “winners and losers from free trade”?

    The graph illustrates the concept of “winners and losers from free trade” as it shows the effects of a tariff of the American car market. According to the tariff graph the price of American cars stays stable where price of Korean cars decreases so that there is an increase in consumption of Korean cars. Due to that the winners are American consumers and Korean car producers where as the losers are American car producers.

    2.Who gains and who loses from free trade with the US within Korea?

    The ones who will gain in Korea are car producers and Korean workers. This because the cars will find consumers in America so that the producing amount will increase and this will lead firms to have more workers. Therefore the unemployment rate can decrease in the long run. Also American consumers will gain from this free trade because of cheap cars. The one who will lose in Korea will be the companies trying to sell Korean cars domestically. Also American car manifacturers will lose as there will be more desirable products, Korean cars.

    3.Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    If America opens new car companies to compete with Korean cars there will be some new jobs created but this will be a short term issue. Beause after sometime the company can be closed because of cheap cars that belongs to Korea.

    4.Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians are thinking in short run so that their actions will be according to short run effects. Yes in the long run there will be some improvements but in short run there won't be any avaible jobs and the car producers in America will suffer from dumping.

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92. # Dilan Guneson 17 Oct 2011 at 6:13 pm

    To diana.ecsl1.f09

    I liked the answer for the 4th question. Actually you are right about the politicians' way of thinking in the long term and short term.

    Thanks..

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93. # Talia Greeneon 17 Oct 2011 at 7:27 pm

    1. How does the graph illustrate the concept of “winners and losers from free trade”?

    With free trade, there would be no tariffs. The graph shows that domestic suppliers benefit from tariffs, as they cause their supply to increase, and the US government benefits from tariffs, as they gain revenue from them. With free trade, domestic suppliers and the government would be losers as the lack of tariffs harms them. The graph also shows that without a tariff, the supply increases and price decreases, so the consumers would benefit from free trade. Consumers would be the winners.

    2. Who gains and who loses from free trade with the US within Korea?

    Korean manufacturers would gain as they would be able to market their products in a wider market and make a larger profit. Korean consumers would also benefit as they would have access to a larger product market and would benefit from the competition it brings. The Korean government would lose, as they would no longer gain revenue from tariffs, and any Korean producers of goods that the US has the comparative advantage in would be outcompeted and lose.

    3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    Industries that the US has a comparative advantage in, such as service industries, would expand. If the amount of new jobs that open up in these industries is larger than the amount lost by industries that decline because Korea has a comparative advantage, the number of jobs available would increase.

    4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Such deals do result in certain industries declining, and cause unemployment in those industries. If the unemployment would be focused in an area that the politicians have a lot of constituents in, it would be wrong for them to support the deal and the politician would lose a lot of support.

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94. # Talia Greeneon 17 Oct 2011 at 7:32 pm

    @ Dilan

    I agree with your answer to #4. While there may be benefits in some industries in the long run, it will hurt others in the short run, and politicians have to operate on the short run.

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95. # jcarrenoon 17 Oct 2011 at 8:38 pm

    The graph shows how the free trade situation benefits the consumers and in some way the ones who lose are the domestic producers, but in the long run they will need to specialize more therefore enhancing production and shifting their curve downwards. The consumer surplus increases in spite of the producer surplus when free trade is allowed and also the consumer surplus is the one contracted when we impose tariffs, therefore consumers are the ones who “pay” for the protectionism while domestic producers are the winners of protectionist policies (as it should).

    Korean domestic producers would surely be the ones who lose with that opening of the market, as a result the price for goods in Korea would fall and imports from US would rise, domestic producers would see their surplus reduced drastically.

    In the long run it may be possible, because a free trade situation would obviously reduce the opportunities for american domestic producers, therefore leaving some out of the market, that, would have the immediate consequence of loosing some jobs, what may make us think that it’s impossible that a FTA would have a positive impact on jobs, but if we look into the future, we may forecast that those producers that are no longer efficient enough to meet market requirements, will fight to enhance their production system so they are again competitive, that would have the consequence of investment in production of high tech manufacturer machines, therefore needing qualified workers to build them, and that’s one of the main US industries.

    Because those improvements and positive consequences happen either in the long term or in social aspects, and the only opinion held about that government would be that they destroyed actual jobs in that moment, nearly nobody would see the benefit in the future, because we tend to look just the present. And furthermore, what a government want is good statistics and economical results, with low unemployment rates and a high GDP, they care less about the social benefits when economical benefits are in game.

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96. # jcarrenoon 17 Oct 2011 at 8:43 pm

    @Brian Malone

    I agree with you about the 4th question, it's more than the political situation, it's about the legacy of a government when it ends, usually the positive effect of free trade don't show up until several years after the opening, here in Spain it took a decade for the domestic suppliers to improve and create job openings, no government wants to be remembered as the government that increased unemployment because they "trusted" free trade among nations.

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97. # nmolenkampon 17 Oct 2011 at 10:58 pm

    By showing the line of Supply domestic (so domestic producers) and showing D domestic (so the consumers inside the country) and the supply world (that represents the competition) we can clearly see who are the winners and who are the losers of free trade. Because without the line Sworld the supply domestic would be a lot higher, but with the opportunity of buying imported goods, the domestic demand went up, but not the domestic supply, which means that consumers are the winners of free trade and domestic producers the losers.

    Within Korea the winners would be manufactures within South Korea who are able to export their products. It might be that the population itself loses from their exports, because manufactures might focus too much on the international market and not really the home market, but this is not certain.

    A free trade agreement with another country often results in unemployment within that country, however it might also create jobs. Because suddenly domestic suppliers need to deal with competition from abroad, which means they need to make their firm more productive and efficient. Therefore they might need to higher experts or people who can train their employees.

    Even tough free trade made be a great decision, some politicians don’t agree, maybe they are very nationalistic and want to protect their country and don’t want to deal with other countries or they are afraid something goes wrong and in the end their country will be hurt by the free trade deal.

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98. # nmolenkampon 17 Oct 2011 at 11:02 pm

    @Muhammet Murat SEKBAN

    You say that the losers of this trade deal are americans, but actually the american consumer will profit of this deal because they can buy cars at a lower price, the only american that loses are the domestic manufactures.

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99. # nchaneliereon 18 Oct 2011 at 1:28 am

    • How does the graph illustrate the concept of “winners and losers from free trade”?

    The graph in the blog above illustrates the concepts of tariffs in the US car market. The winners in this case will be the Korean producers and the American producers because there will be a lower price and the losers will be the American producers.

    • Who gains and who loses from free trade with the US within Korea?

    The consumers of American cars within Korea will benefit from the free trade between the US and Korea. However, car producers within Korea are losing because of the newly accessible American cars.

    • Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    Free trade agreement will create jobs in America, because industries in South Korea will possibly be wanting and requiring services from the states, creating more jobs, therefore increasing the employment.

    • Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Above all, politicians wish to protect their country and their workers. As long as their country is going well economically, free trade will be considered, if not, they will spend more time trying to protect and ensure that their country runs well. Another main reason they oppose to this trade is that it would make America dependent of South Korea and its trade as well.

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100. # nchaneliereon 18 Oct 2011 at 1:38 am

     @Talia

     Hey, I feel that you could have explained a little more thoroughly exactly why some jobs are created in the US. You explained well that there were some jobs created, but exactly why could have been seen deeper, in terms of the services asked from Korean firms to the US firms, creating employment and jobs

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101. # Bryan_DiLauraon 18 Oct 2011 at 2:03 am

     1.How does the graph illustrate the concept of “winners and losers from free trade”?

     This graph shows how that because of the tariff, the domestic producers are being protected from free trade (and becoming the losers). In true free trade, there would be no tariff, so the domestic producers would be the losers, while the consumers and foreign producers would be the winners.

     2.Who gains and who loses from free trade with the US within Korea?

     The domestic producers (like Ford) would lose, as well as the Korean government. The people of both Korea and the US would gain, as well as Korean producers. People in Korea would benefit because of the increased competition because of the access to a bigger market, giving further efficiency.

     3.Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     Yes. While there may be certain areas where the US will lose employment in (such as car producing for Ford), because there is no longer any boundaries to trade with Korea, there could be another industry where the US could flourish, creating even more jobs than what was available before. I think the article mentioned the industrial machinery production industry. This could tap into the amount of skilled workers that the US has, while getting away from the auto industry, which Korea has a comparative advantage for.

     4.Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     I feel that it is partially because most politicians are very short-term minded when it comes to economics. Because most of the things that they do will only effect their job for (at least in the US) about 8-10 years, they only like to do things that will give them an immediate reaction in the economy. This isn't always in the best overall interests of the economy. Free trade deals can sometimes be kinda bad at first, before the economy readjusts itself. Politicians want to avoid that at all costs.

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102. # Bryan_DiLauraon 18 Oct 2011 at 2:07 am

     @nchaneliere

     I somewhat disagree with you for your answer to the last question. Decisions like this for free trade agreements often end up being better for the people in the country than they were before. I feel that it is just the politicians fear of the short term fallout from their decisions.

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103. # HEppleron 18 Oct 2011 at 3:08 am

     How does the graph illustrate the concept of “winners and losers from free trade”?

     The graph illustrate the concept of winners and losers in free trade multiple ways. The consumer will be a winner because the graphs shows the consumers will be able to purchase automobiles at a lower price, a lower price for a consumer makes them a winner. The losers in this situation would be domestic producers who would be receiving less business because their goods are more expensive than south Korean goods. The south Korean producers would also be winners because they will be able to export more goods increasing profits. The graph also shows that better allocative efficiency will be achieved benefiting the american market in the long run because there will not be a dead loss on the market allowing those resources to be employed in a more productive manner creating a winner in society as a whole.

     Who gains and who loses from free trade with the US within Korea?

     Within Korea, the manufacturing industries win because South Korea can manufacture goods more affordably than American firms creating increased profits for the manufacturing firms. The service industries will suffer because the US has the comparative advantage; therefore, the consumers will begin to leave South Korean firms in favour of cheaper American goods.

     Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     It is a possibility to have new jobs created in America. American has the comparative advantage in some areas such as the service sector. The advantage will result in the increase of the market and firm size. As the firms and market increase, more people will need to be employed in order to create more goods; however, the number of jobs added to these markets does not necessarily exceeded the number of jobs lost to the foreign markets. There is also the possibility that capitol intensive markets and not labour intensive markets will experience the greatest growth resulting in limited job creation. While there is the possibility for job creation, it is a gamble for the government.

     Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     Politicians oppose such deals because they are primarily concerned with the short term benefits and problems. Politicians are elected based off their policies and the results; therefore, if in the short run, free trade causes job loss, the politicians will not be re-elected. There are also problems involving other policies by the foreign government. Politicians must consider what the government they are trading with represents. For example, the US will not trade with Cuba because of ideological differences. Also, free trade deals do not guarantee an improvement in the economy. The government is taking a chance, and not all politicians believe the chances are favourable or even believe in the ideology of trade.

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104. # HEppleron 18 Oct 2011 at 3:11 am

     @ nchaneliere

     Good post. I have a question about your opinion in question two. Do you think that the increased presence of American cars on the South Korean market will have a profound impact even though they are more expensive? If so, do you think getting rid of the tariffs will help the American car industry? Just a point of clarification.

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105. # Aaydoganon 18 Oct 2011 at 9:19 am

     1.) How does the graph illustrate the concept of winners and losers from free trade?

     The more the price of Korean cars is, the more the American consumption of Korean cars will be and also the price of American cars will stay the same. The American consumers would like to buy from the Korean cars and so the demand for Korean cars will increase as the demand for American cars decreases. Thus, while the American manufacturers become losers, American consumers are the winners from free trade, when we consider the concept of tariff.

     2.) Who gains and who loses from free trade with the US within Korea?

     Korea will gain from free trade as the demand for its automative sector will be chosen, so Korean cars would be much more demanded in the USA. However, Korea will lose from beef trade with US as beef is more demanded in US markets in Korea. So in total, the losers from free trade is the beef producers in Korea and also the car manufacturers in the USA.

     3.) Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     In the long run, domestic markets in USA may change their minds as they couldn’t profit from automotive sector, they will try new sectors instead of automotive. So the efficiency of domestic firms will be increased and so the new sectors that are found lately may create new job opportunities.

     4.) Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     All the efficiency from free trade results in long run which would not work for politicians. Politicians would like to make difference in short run, since they want to be elected, so that what they do is being limited in short run and so they will develop the infrastructure.

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106. # Ozge Elifon 18 Oct 2011 at 9:25 am

     1.How does the graph illustrate the concept of “winners and losers from free trade”?

     The graph shows the effects of tariff to American car markets. People will be willing to buy Korean cars because the price of them will be decreasing and American products will stay the same. Thus, we say that consumers and Korean producers are the winners of this competition and American producers are the losers.

     2. Who gains and who loses from free trade with the US within Korea?

     Free trade between Korea and US means that cheaper Korean products in US and cheaper US products in Korea.

     3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain.

     There will be a change in the allocation of the US’s resources, so that there will be an increase in jobs which will result in more people employed.

     4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     Politicians are dealing with short-run results instead of looking for long-run results. Thus, they will not give importance to the positive long-run results such as allocation of resources, efficiency and employment opportunities. Since they are concerned about being chosen, they will think about negative short-run effects.

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107. # jjowetton 18 Oct 2011 at 12:49 pm

     1. How does the graph illustrate the concept of “winners and losers from free trade”?

     The graph in the blog presents the effects of a tariff which is placed on imported Korean cars into the US. Consumers in the US are the most direct winners from free trade as they will have to pay lower prices for cars. With the tariff in place, the world supply of cars is decreased and prices are pushed up. Tariffs therefore disadvantage consumers. However, the price of a car is still cheaper (with tariff) than when there was no free trade. Consumers are therefore definite winners from free trade. On the other hand, American producers will be definite losers from free trade. With free trade, the world price of cars appears a lot cheaper than that of domestically produced cars in the US. Therefore, consumers will opt for the cheaper and more efficient option: being Korean imported cars. This means that American producers receive less revenue and are eventually forced to make job cuts. This creates unemployment and eventual closure of many American car manufacturing firms.

     2. Who gains and who loses from free trade with the US within Korea?

     The main winners from free trade with the US, within Korea, are Korean car manufacturers. These firms experience ever-increasing revenue as so many American consumers are demanding their cheaper and more efficiently produced cars. Furthermore, Korean consumers will benefits from low prices placed on goods imported from the US.

     3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     Yes, it is possible. Domestic firms in the US that produce goods and services that are being imported from other countries (ie. Korea) via trade: will lose out. They will eventually shut down unless they increase efficiency and lower their prices, or some forms of protectionism is put in place (ie. tariffs). This will create structural unemployment. However, domestic firms in the US that are producing goods and services that are being exported to other countries (ie. Korea importing American beef) via trade: will hugely benefit. Many jobs will created as the industry flourishes with increased revenue and efficiency.

     4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     As the article said, politics and economics do not often mix well. Politicians often (and quite rightfully) act in the interest of their country. Sometimes, they act only in the interest of their country, primarily its citizens: probably because they are the ones that vote. Politicians often oppose free trade because it results in the loss of jobs (structural unemployment). They often act on a short-run basis rather than a long-run basis. Unfortunately, free trade does not present many short-run benefits and is therefore often disregarded. It often takes time, for free trade to have an impact on a population

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108. # jjowetton 18 Oct 2011 at 12:52 pm

     # Bryan_DiLaura

     I strongly agree with all of your answers. I feel as though we agree on most concepts ad to who gains and and who loses from free trade. Very strong analysis!

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109. # twilliamon 18 Oct 2011 at 1:28 pm

     1)The graph shows the tariff imposed on U.S. cars which cause more consuemrs to demand for Korean cars as they are cheaper.

     2) The lossers in this case will be the Americans producers because more consumers demand for cheaper products from Koreans instead of their domestic products (U.S.).

     3) Yes, its possible because int he long-run, US will focus more on production which involve highly skilled labor since Americans employees are mostly highly skilled according to the text. The production of industrial equipment will benefit US in free trading with S Korea.

     4) Politicians are only concern with their image and status. They are searching to solve a problem which is in the short-run, and seek for government's attention by producing a good result by solving a problem in the economy. Since free trade will result in so many benefits for the country, there will be lack of opportunities for politicians to search for problems for them to solve.

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110. # twilliamon 18 Oct 2011 at 1:30 pm

     @# Behiye Dasdemir

     we sure have different views on the 4th question especially different politicians from different country have different views, but yours is a good explanation.

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111. # nflanikenon 18 Oct 2011 at 2:43 pm

     1. How does the graph illustrate the concept of “winners and losers from free trade”?

     The graph illustrates different winners and losers. First of all the consumer will be a winner since they can buy goods at cheaper prices. Because of free trade Korea can sell goods at cheaper prices and thus the consumers are winners. The producers of these goods in South Korea will also be winners since free trade opens up their maximum output and since they can sell their cheaper goods in the US they are the winners. The losers however are the domestic producers. The graph shows a decrease in domestic supply since the global supply is at a lower price than the original equilibrium price. Since domestic producers can only produce fewer goods at a lower price they do not make as much money.

     2. Who gains and who loses from free trade with the US within Korea?

     Within Korea the service sector will lose and the manufacturers in Korea will win. The service sector in the US has a comparative advantage to that of Korea’s service sector thus the US will take over more of that market. On the other hand Korea’s manufacturing market will be the winners since they can produce goods at cheaper rates than the US can. Korea will be able to export its manufacture goods at cheaper prices and thus win in that category.

     3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     Yes it is possible but it is not guaranteed by any means. As I stated above, the US has a comparative advantage in the service sector over Korea. If the US was able to build off of this comparative advantage they might be able to create jobs. This would require that the US creates more jobs in the service sector if they were to switch their focus to that sector but at the same time lose fewer jobs to the manufacturing sector in Korea. If the US lost more jobs to these foreign markets they would not be able to create jobs.

     4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     Politicians oppose free trade deals usually because they are more “narrow minded” so to say. One of the biggest problems that the US government is having is that politicians are unwilling to find a happy medium. In this case they are unwilling to settle for anything less than selling all types of beef in Korea. Instead of starting off with certain age beef and slowly increasing the types of beef exported they want to export all types of beef. Politicians look at the short term more often because that is what voters will see when they are up for reelection. If voters have not had a chance to see the long term benefits of a compromise with free trade agreements, the agreement serves little purpose to the politicians, thus they aim for short term, and fast, improvements.

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112. # nflanikenon 18 Oct 2011 at 3:00 pm

     @jcarreno

     You briefly mention that economic gains tend to happen in the long run and voters will only vote to reelect a politician if they have improved the economy in the short run. Do you think that lengthening politicians' terms will allow them to implement long term policies, which will benefit the economy more. In the US many politicians can only spend a couple of years in their position before they start running for their candidacy again so they are always concerned with immediate results.

     Noah

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113. # Huanni Wuon 18 Oct 2011 at 3:43 pm

     1) On the graph the yellow area indicates tax revenue of the American government. Once the trade barriers are removed there will be a loss of tax revenue and thus the U.S. government is the loser.

     The green area indicates the American consumer and supplier surplus which is lost under the tariff imposed by the U.S. government on imported automoblie. Once the tariff is removed, the social welfare is regained.

     2)The consumers especially are the winners as they also enjoy the world price of automobile which is less than the domestic price.

     The domestic suppliers, however are the losers since they are again forced to lower down their prices and share the market with Korean competitors.

     The Koeran exportors are the winners as they can again benefit from economies of scale from massive production. The larger quantity of export allow them to increase revenue.

     3) The will be some jobs available from the opening trade with Korea in the States. As the article indicates, there will probably more job opportunities in service industries. Specialization will always decrease jobs in one field and creates some in another field in which the country has stronger comparative advantages.

     4) The politician cares about the voice of majority which in this case is represented by Amercian workers. They concern about this because it determine their reputation and political position. If millions of automobile workers are unhappy about lossing their jobs due to the opening trade and dislike this politician, it make shakes the politician's position. However, the increase in efficiency is something that cannot be seen in short-term, cannot be perceived easily. Those invisible benefits seem not able to bring them much good reputation. What's more, even though there might be creation of jobs, those jobs are unlikely prepared for the ones who've lost their jobs. Opposition from the automobile manufacturers will still influence the politician.

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114. # Huanni Wuon 18 Oct 2011 at 3:56 pm

     @nflaniken

     I especially like your comment about "Politicians look at the short term more often because that is what voters will see when they are up for reelection" and I agree that politicians are more fond of short-term benefits as that concerns how the people view them.

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115. # Quinn Richardsonon 18 Oct 2011 at 4:01 pm

     1.The fact that the world price for this good is lower than the domestic price shows that there are winners and losers in this free trade situation. In this particular situation the winners from free trade are the foreign exporters as they have the comparative advantage in the production of this good shown by their lower prices. They, as a result, assume most of the domestic demand (Q1 to Q3) while domestic producers only assume 0 to Q1.

     2.Within Korea, the manufacturing sector will probably be the sector to gain from free trade with the US. They are able to offer products at a lower price than their American counterparts. However, Korea may experience some losses as well. The US may have the comparative advantage in the financial and service sector allowing for US firms to assume much of the Korean domestic demand. The consumers of Korea will also gain from free trade as they will be offered lower prices.

     3.Yes this is very possible. Although the Americans may not have the comparative advantage in the manufacturing sector, they may have the comparative advantage in some other sector. If wasted resources previously allocated to the manufacturing sector are then allocated to the more efficient sector, they could take full advantage of this new demand opportunity from free trade. This will ultimately lead to this sector expanding and creating jobs.

     4.The main opposition to free trade comes from the threat of unemployment. It will not look good if many are unemployed as a result of a decision made by politicians. And often there is a lag between unemployment and new employment opportunities opened up as a result of free trade. Generally it is the short run outcomes of decisions made as this usually determines whether they will be re-elected or not. This is despite the fact that these decisions might be optimal for the long run.

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116. # Quinn Richardsonon 18 Oct 2011 at 4:09 pm

     @twilliam

     I agree that despite what politicians may say, the implementation of free trade does benefit the economy as a whole in the long run. It allows for the more effecient allocation of resources as well as the boosting of employment in these sectors. I think, however, that the reasoning behind proventing free trade politically is that in the short run, it might make the polititians look bad especially if their constituents are involved in the industrial sector. I don't think it is because they are afraid of a lack of problems to solve once free trade has had its opportunity to grow the economy.

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117. # tsekineon 18 Oct 2011 at 6:03 pm

     1. I think the graph indirectly illustrates the concept of “winners and losers from free trade” in the sense that every small aspect would lead to a “winning” situation, as well as a “losing” situation i.e. benefits and limitations of free trade of the US automobile market. For example, the reduction/removal of tariffs would mean “an increase in imports from Q4 – Q2 to Q3 – Q1”, which would suggest that consumers are more willing to buy the imported automobiles, which then results in a loss of jobs for workers in the US automobile industry (this would be a “losing” situation for the workers in the US automobile industry). A “winning” satiation could be the fact that the removal of tariffs would lead to an increased efficiency and resource allocation (as shown by the combined areas of the green triangle, X and Y), this would benefit both countries.

     2. Within Korea, the Korean automobile industry would benefit the most out of this free trade agreement; they will be the “winners” as they are able to export their automobiles without any concerns of trade barriers. However the beef industry in Korea would “lose”, as the opening up of free trade would allow American beef industry (which is rather strong) to enter the market, and thus consumers may want to consume the cheapest alternative.

     3. It is possible for a free trade agreement with Korea to create jobs in America. We can take the American services industry as an example, as free trade opens up, America can reduce the production of automobiles and specialize more in the service industry. This would lead to the American services industry to recruit and acquire more employees. However it is most likely that there will be a lot more unemployed workers than the amount of jobs available/created. Furthermore, certain service industry would require special skills and training, which workers in the automobile industry may not possess. Therefore it may either cost more than what is planned (for training and such), or leave a lot unemployed.

     4. Politicians oppose free trade agreements simply because they over-look the benefits and advantage the country (both countries) can gain over the long run, they only look at the short-term effects. Also, if we think about it, not many people would know all the logic behind free trade (efficiency, allocation in resources, etc). Most people are focusing too much on the employment/unemployment/job aspect of economical decisions. So in conclusion, politicians oppose free trade agreements, simply to keep their image strong and want to be “well-liked”.

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118. # jackson.moteon 18 Oct 2011 at 6:10 pm

     #nflaniken

     I agree with your answer to question 3. It's very often that nothing is guaranteed in economics, especially if it involves creating jobs. If imports decrease, this will increase jobs domestically but having a fair imports is often healthy for an economy because it can keep prices down.

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119. # jackson.moteon 18 Oct 2011 at 6:21 pm

     1. How does the graph illustrate the concept of “winners and losers from free trade”?

     The graph illustrates the concept of "winner and losers from free trade" by showing the different sectors of revenue. The yellow section known as the Tariff Revenue goes straight to the government in the form of revenue. However the green sections labelled X and Y are losses in government revenue. This directly affects the revenue from the government's tariff indicated by the yellow area. The section between Pt and Pw to left of Y indicates domestic revenue. This graph illustrated this concept by showing the different areas of revenue. The tariff illustrated could be beneficial or possibly detrimental to this economy.

     2. Who gains and who loses from free trade with the US within Korea?

     Within Korea, the manufacturing industry will benefit from free trade with the US. Low quality automobile producers within South Korea will lose in this situation because the US will import more high quality automobiles than they will low quality automobiles.

     3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     It is very possibly however it could backfire for the US. If the US decided to import more high quality foreign automobiles from South Korea, US automobiles companies such as Ford may be forced to lay off workers because of a decrease in production due to a loss of demand for Ford automobiles. However this free trade could increase jobs in the United States because it would create competition in the auto industry.

     4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     Politicians oppose free trade deals that would results in improvements because if these free trade deals do not go as planned, this would result in the blame being put on them. An increase in jobs looks better than a decrease in jobs when running for re-election.

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120. # tsekineon 18 Oct 2011 at 6:42 pm

     To: Quinn Richardson

     For your response to the second question, I have not considered the service sector in Korea being the “losers” while writing my own response, good point there.

     I completely agree with your last response. Also, a very good point you brought up about the time lag between unemployment and new employment.

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121. # Manuel Rivason 18 Oct 2011 at 7:37 pm

     The graph shows how tariffs increases the lower price, and thereby the better one for consumers. Thereby the main losers will be consumers which will lose the opportunity to consume cheaper products produced by more efficient companies. It illustrates the concept of winners and losers as it represents the different effects of these policies, showing who will have benefits and who loses.

     The ones who gain are the less efficient Korean companies as they will not have to face the more efficient American competition, and thereby be able to exploit a bigger percentage of the market without needing to invest in research in order to be more aggressive with international producers. The losers could be American companies, in some way, even though they still have many markets where to export their products. The main losers would be Korean consumers.

     It could be possible. It is true that American manufacturing companies would have to face new competition from more efficient Korean firms. But America has an absolute advantage in their service companies, which would find a new market to exploit in the Asian country; thereby they would expand and demand more workers.

     I believe it happens because if the state opens it´s boundaries it will create benefits for the full world economy, due to a better allocation of resources… but it could damage some of the national industries, especially in the short run, and this may bring population disagreement and lose of votes.

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122. # Manuel Rivason 18 Oct 2011 at 7:43 pm

     To # jackson.mote

     I do not really catch your second point. I mean, Korean automobile producer are supposed to be more efficient than American one, thereby the quality is more a less the same, but the prices of the Asian offer are less due to a better production which decreases the costs of production. Thereby the loses would be the American company as the Korean product would be more demanded thanks to the qualities above named

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123. # jcuervoon 18 Oct 2011 at 7:47 pm

     Julian Cuervo

     1.) The graph illustrates the concept of “winners and losers from free trade” because it represents the winners and losers through the yellow and green regions, respectively. The winner is represented in the yellow region.

     2.) From free trade, the people who gains is Korean automobile industry will gain from free trade as both Korean and American consumers will be more likely to buy Korean cars because they are produced more efficiently and at a lower price. Korean consumers will also gain because they will be able to purchase more goods at lower prices. The losers are the Korean politicians and diplomats. The Korean government will lose because it will increase political tensions with the US because they are their number two biggest importer.

     3.) A free trade agreement could actually increase jobs in America because the Korean imports are used by Ford car producers to make cars. So, even though there will be a decrease of industrial equipment production in the US, the actual US car-making companies like Ford will see their supply increase, which will open up more jobs in that market.

     4.) Politicians oppose free trade deals that would result in such improvements, allocation of resources, and even employment opportunities for American workers because there are also political, social, and military aspects involved. Politicians don’t want their country to get too dependent on another country in a certain industry because this could cost economic and military problems in the long run. In times of war for example, a country that is too dependent on a foreign industry will hurt the country if the war is a total war, meaning that a country has to shift its industrial purposes to war goods. Also, politicians want to have a sense of nationalism for the country and will want them to have their own stable and powerful industries, not depend on another.

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124. # jcuervoon 18 Oct 2011 at 7:47 pm

     # Dennis.echl.f09

     I liked and agreed with all your answers. For number 1, I agree that the price of Korean cars decreases and the price of American cars remains stable, it follows that there will be an increased consumption of Korean produced cars. I also really liked your answer to number 4. It is important to note that politicians are only in office for a short period of time, so their success depends on the short term successes and not the long term successes. An example is Franklin Roosevelt’s popularity for his role in helping the US survive the Great Depression in the late 1920s and early 1930s.

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125. # Ccolbergon 18 Oct 2011 at 9:35 pm

     1. How does the graph illustrate the concept of “winners and losers from free trade”?

     The above graph demonstrates the US automobile market with tariffs. If tariffs were removed, and the market existed with free trade, the winners would be consumers and in the long run American companies, whereas the losers would be the government and some workers. The graph shows that if the tariff were eliminated, price would move down from Pt to Pw, meaning that consumers could buy the good at a lower price. Furthermore, in the long run American companies would be forced to become more efficient and to better allocate their resources. The elimination of the tariff would however cause some people to lose their jobs as the supply from overseas would be greater. Finally, the yellow rectangle would be eliminated, meaning that the government would lose the revenue that they were making off of the tariff.

     2. Who gains and who loses from free trade with the US within Korea?

     If free trade was allowed between the US & Korea, than in Korea the car manufacturers would gain whereas beef manufacturers would lose. Car manufacturers would have more opportunity to sell their cars overseas and come make a higher profit. Beef manufacturers would loose out since Korea could import more American beef again.

     3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     Yes, it is entirely possible that a free trade agreement with Korea could create jobs in America. While the US might lose out in some industries, they could gain in industries where they have a comparative advantage. As the article states America has an abundance of highly skilled labor and America could shift its focus to manufacturing that requires this labor, thus creating new jobs.

     4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     One reason politicians may oppose free trade deals is because of the negative initial results of free trade. At the beginning it is hard to see all the benefits of free trade since jobs are being lost and domestic companies are sometimes hurt. If politicians choose to adopt policies with free trade, voters might see these bad initial results and not the good in the long term, and thus feel against free trade.

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126. # Ccolbergon 18 Oct 2011 at 9:40 pm

     @Mehmet,

     I agree with all your answers. I like how you looked at structural unemployment for question 3 and noted the costs in the short run but the potential for growth in the long run. I also like that you looked again at the short run vs. long run for question 4. I agree that politicians are very concerned with their image and that free trade can look bad in the short run.

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127. # cleon 19 Oct 2011 at 12:26 am

     1. How does the graph illustrate the concept of “winners and losers from free trade”?

     It shows how much the tariff is promoting domestic goods within the us. The yellow section shows the extra money made from the domestic products. But the yellow part also shows the money that could be made by foreign companies.

     2. Who gains and who loses from free trade with the US within Korea?

     -Korea will be forced to give up the beef ban in order to achieve free trade. Doing so means that cattle farmers in Korea will take a hit, on the other hand, jobs in the automobile industry will increase.

     3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     The free trade agreement may mean that the jobs in the automobile industry will be lost, however free trade promotes a better allocation in resources across both countries. Korea will pick up the automobile production, and the us will encounter other industries expanding because of trade with Korea.

     4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     -Doing so makes them look bad. All anyone knows is that jobs are lost in a certain sector, not the bigger picture. Economics also works in the long run, and this type of adjustment to a free trade between the us and Korea won’t happen overnight. Politicians live in the short term and are always focused with being re-elected in the short term. It is likely that voters will see the negative effects immediately, and the positive effects in the long run.

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128. # cleon 19 Oct 2011 at 12:30 am

     # jcuervo

     on number two, yes korean diplomats will loose, but so will american diplomats and politicians. However, the major reason that korea will loose out is that american beef will be imported again. Korean cattle industry will likely be weakened.

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129. # Mitchell_Broughtonon 19 Oct 2011 at 1:57 am

     -How does the graph illustrate the concept of “winners and losers from free trade”?

     The graph shows how a tariff on imported automobiles in the US affects resource allocation, and how much money the tariff makes. If free trade were implemented, the first thing that the US would lose is that sum of money that goes to the government because of the tariffs. Furthermore, they would lose demand for their cars, illustrated by Q2 dropping to Q1 on the graph because of the cheaper Korean cars in the US market. This means the US car manufacturers would be the losers. South Korea would be the winner because car manufacturers in their country would improve their car sales by the same amount that US cars demand decreased. US consumers would also be winners because prices for cars would decrease and US car manufacturers would be forced to become more competitive.

     -Who gains and who loses from free trade with the US within Korea?

     US manufacturers would be the losers because they would lose demand for their products due to cheaper Korean products being imported. The reason Korean products are cheaper is because of the cheaper wages they are able to pay. The winners are the South Korean manufacturers whose products have increased demand, as well as consumers in both countries because of increased choice and decreased prices.

     -Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     It is possible that overtime it could create more jobs due to changes in technology that may come in the future, or new discoveries of useful functions for resources that are primarily in the US. However, in the short run, it would not create any new jobs for the US.

     Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     Politicians are always worried about the short term. In the short term, Americans will lose their jobs because they are not as efficient as foreign manufacturers. They care about their jobs, and want to be reelected in the coming years. If they do something drastic such as allow free trade, it will surely mean they won't get reelected as many US consumers will lose their jobs.

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130. # Mitchell_Broughtonon 19 Oct 2011 at 2:00 am

     @jcuervo

     For the second question, I like the fact that you are bringing in politicians into the winners and losers. Many people often forget people who work behind the scenes, but who play a major role in determining how an economy functions. Don't you also think consumers in both countries would gain in the sense that they have more selection of goods at lower prices?

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131. # Gunnhildur Ómon 19 Oct 2011 at 3:31 pm

     How does the graph illustrate the concept of “winners and losers from free trade”?

     The graph shows the effect of imposing a tariff on imported cars in the US. The government is gaining revenue, the amount of the tariffs, and the consumers have to pay higher prices.

     Who gains and who loses from free trade with the US within Korea?

     Korean producers will benefit since they are selling their product in larger quantities, leading to their revenue increasing. The US producers will be harmed since it is very hard for them to compete with the lower prices of Korean products.

     Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     Free trade is about how nations can specialize in the production of certain goods and thus increase efficiency. If there is free trade between Korea and America the primary result for American producers of cars will be loss of jobs and decreased production. This is because it is very hard for American producers to compete with the Korean producers due to lower price of Korean cars. However in the long run it is possible that new jobs will be created since American producers specializes in other industries, this demonstrates much more efficiency, and more jobs can be created.

     Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     This is because they are worried about the short term effects. The short term effects would be harmful for domestic producers since it can lead to domestic firms running out of business, more unemployment and the nation needing to rely on imported goods. This suggest that they look more at the short term effects than the long term effects that are much more likely to be beneficial to the nation.

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132. # Wonwoo_Choion 19 Oct 2011 at 6:17 pm

     • How does the graph illustrate the concept of “winners and losers from free trade”?

     The graph illustrates the concept of winners and losers by marking the gains and losses of the different parties in involved in the market. For example, the yellow representing the tariff revenue for the US government is a ‘win’ for the US government. Other indicators such as the green triangles of deadweight loss represent a ‘loss’ for US consumers and world allocation of resources.

     • Who gains and who loses from free trade with the US within Korea?

     Winners: Korean manufacturing (automobile) sector

     Losers: Korean service sector

     • Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     First of all, the American service sector will flourish under the new free trade agreement. To increase profits, firms will seek to expand their supplying capabilities and hence increase employment.

     As for the other sectors, although it is self-evident that a free trade agreement will destroy existing jobs in American in the automobile sector in the short run, if America manages to restructure its economy and employment demographics to hone its comparative advantage in new or different sectors of the economy, it can surely create jobs. Moreover, the increased competition allows firms to grow more competitive and grow in the long run to produce more employment.

     • Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     This is because one of the primary motivations for action for politicians is increasing their chances for re-election. People are very subjective creatures and are hopelessly biased beings that even if the theory and the logic behind the free trade agreement is understandable, if it is going to cost them their jobs, then they are going to try to do all they can to stop it from disrupting their economic stability. Politicians will have to respond to the opinions and demands of their constituents for reelection, and therefore they are likely to vote against legislations which will harm their electorate. (or special interest groups) The rationale behind political decisions are not necessarily economic in nature.

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133. # Wonwoo_Choion 19 Oct 2011 at 6:26 pm

     # Gunnhildur Ómarsdóttir

     Who gains and who loses from free trade with the US within Korea?

     I'm assuming you mean Korean automobile manufacturers when you say "Korean producers"…

     Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     The American automobile industry is huge. It holds hundreds of thousands of jobs, and a sudden influx of cheaper, higher quality Korean cars making skid marks over Ford's and GM's balance charts may lead to an accelerated pace of the atrophy of the industry. Is this a desirable phenomenon to have lots of workers unemployed at once? At times of such economic crisis as now, can the United States afford to have increased unemployment?

     Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     But how do those short term effects affect politicians' decisions in particular?

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134. # Michael_Mayeron 20 Oct 2011 at 1:12 am

     How does the graph illustrate the concept of “winners and losers from free trade”? Who gains and who loses from free trade with the US within Korea?

     We can see that with a tariff, not only does the government generate a bit of revenue, but the price of imported cars goes up, causing a decrease in demand for them. This means that there is a greater demand for domestically produced cars. So, the country in question benefits from a tariff. If free trade prevented a tariff, the domestic companies in the US would be the 'losers' because they would have a lower demand. The international producers (Korea) would be the 'winners' because they would make more revenue due to a high demand for their lower priced cars.

     Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     Maybe Korea ships parts to the US, and would construct factories in the US for the assembly of the cars. This would create jobs, and an increase in the demand for Korea's cars would call for more factories, therefore more jobs.

     Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     Because short-term effects of free trade deals would include an increased unemployment rate. For re-election, a politician has to keep these numbers down. So, in efforts to maintain a positive rapport with the people, a politician ironically makes more short-sighted decisions that end up damaging the economy long-term.

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135. # Michael_Mayeron 20 Oct 2011 at 1:15 am

     @Wonwoo_Choi

     I liked your response to the final question; you really hit on something about politics that frustrates me. A good politician would make the logical choice, but a successful politician would not. That is quite a conundrum, is it not?

     -Michael

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136. # Muhammet Emin Uylason 24 Oct 2011 at 7:36 am

     1.How does the graph illustrate the concept of “winners and losers from free trade”?

     According to graph we can see the effects of the tariff and it shows us that people will buy Koreans cars more than Americans because they are cheaper.

     2.Who gains and who loses from free trade with the US within Korea?

     In this situation loser of free trade is Americans because Koreans selling their cars at lower price so Americans will prefer their cars more.

     3.Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     It is possible to create job opportunity in America in the long run by free trade agreement with Korea.

     4.Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     Politicians elected in the short term but positive effects of free trade is in the long run so free trade may damage their political power because in the short run people may lose their jobs and they can lose votes.

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137. # Muhammet Emin Uylason 24 Oct 2011 at 7:39 am

     @Michael_Mayeron

     I agree with your comment about last question. You are right about re-election issues.

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138. # woverhauseron 04 Nov 2011 at 4:16 pm

     1. How does the graph illustrate the concept of “winners and losers from free trade”?

     It demonstrates how the US auto makers will lose demand for their cars because they can’t compete with the Korean cars, who are shown as the winners because the graphs shows they now supply more.

     2. Who gains and who loses from free trade with the US within Korea?

     The car industry will gain a lot because they can now export more cars to America and earn more money. The losers will be the beef industry because with the removal of the ban, the United States can begin to export their beef again.

     3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     Yes. The car industry might suffer some losses, but the other industries that can now export more to Korea thanks to the removal of trade barriers can expand and add more workers.

     4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     They could be focused on how the free trade would affect their district. If they were the representative of Detroit, where the large automobile manufacturers are based, they likely would be against it to protect the workers in their district, even if other districts will benefit.

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139. # woverhauseron 04 Nov 2011 at 4:20 pm

     @Michael Mayer

     You make a good point about the ironic decisions that politicians make.

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140. # SuyeonSoon 09 Nov 2011 at 4:40 pm

     1. This graph shows the impact of decreased tariffs in the US car market. As tariff on Korean cars is decreased, the price graph for this would vertically decrease. Therefore, more american consumers will buy Korean cars because it became cheaper, and this makes Korea a winner in the US car market.
     2. The winners in South Korea are manufacturers as low tariffs enable them to export more goods to US market, and losers are Korean service industries.
     3. Yes, it is possible in long run. In short run, there might be some loss of job because Korean manufacturers will take the American market at first. However, in long run, as the competition intensifies and as American manufacturers become able to produce goods that can compete with Korean goods, low tariffs will help them to export their goods easier than before. This increase of demand caused by increased export will definitely contribute to increase of jobs in US.
     4. It is because of loss caused in short run. In short run, import of Korean goods will cause increased unemployment rate in Korea because consumers wouldn't buy American goods that much. Increased unemployment rate will cause many political problems because it makes politicians look like they are not working hard to fix nation's economic problem.

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141. # SuyeonSoon 09 Nov 2011 at 4:42 pm

     @woverhauser

     I like your comment about American politicians. I think you understand American politics and it is really interesting how you connected that to answer the question.

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142. # abredeeon 06 Dec 2011 at 11:35 am

     Discussion questions:
     1.How does the graph illustrate the concept of “winners and losers from free trade”?

     As can be seen in the graph, different stakeholders win and loose from the free trade agreement. US car producers who cannot compete with the cheaper Korean cars will have to reduce their output to Q1 and thus loose revenue and profit. The government loses tariff revenue (the yellow area) when the barriers are removed. Korean car manufactures gain, their output increases from q2-q3 to q1-q4. Consumers also ultimately profit because prices decreases and consumers have access to lower-priced and more diverse cars.

     2.Who gains and who loses from free trade with the US within Korea?

     According to the article Korean car producers will profit from free trade with the US. Free trade would mean an increased demand for Korean cars and thus more revenue for Korean car producers. Other Korean exporters who can provide goods at lower prices than they cost in the US will profit equally. Consumers in Korea will also gain because of lower prices and more diversity of products. Korean producers who cannot compete with US prices for certain products e.g. Koreas service sector will have to reduce output and thus will lose revenue.

     3.Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

     Yes if US firms can export to Korea the demand for their products will increase. Thus, they will have to hire more workers and this creates employment.

     4.Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

     Because politicians are hesitant to make decisions that may be unpopular with the public or certain lobbies. The public will blame the government for increasing short-term unemployment and lobbies will act in their self-interest to maintain or increase profit. In the long-term, however, the decisions of the government will ultimately lead to more welfare in the US, but this is often hard to realize for the public.

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143. # abredeeon 06 Dec 2011 at 11:38 am

     korean consumers will also gain from the removal of tarriffs. I agree with the short run/ long run aspaects of your answer. What do you think can make such decisions politically popular?

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