Question

Suppose that India imports fertilizers from Canada. The free market price is $12.00 per ton. If the tariff on imports in India is initially 12%, Indians payper ton. One of the accomplishments of the Uruguay Round that took place between 1986 and 1993 was significant across-the-board tariff cuts for industrial countries, as well as many developing countries. Suppose that as a result of the Uruguay Round, India reduces its import tariffs to 6%. Assuming the price of fertilizers is still $12.00 per ton, consumers now pay the price ofper ton. Based on the calculations and the scenarios presented, the Uruguay Round most likely in India and in Canada.

Answer 1

The Uruguay Round most likely resulted in an increase in trade for India and Canada. By lowering the import tariffs, there is now an increased incentive for imports from Canada, as the cost of imports to Indian consumers has dropped from $13.44 to $12.72. This leads to cheaper fertilizers in India and can potentially lead to an increase in demand for Canadian exports, resulting in an increase in trade for both countries.