I n t h I s c h a p t e r y o u w I l L

C l i n t o n W a r n s U . S . W i l l
F i g h t C h e a p I m p o r t s
B
Y
D
AVID
E. S
ANGER
President Clinton said for the first time
today that the United States would not
tolerate the “flooding of our markets”
with low-cost goods from Asia and Rus-
sia, particularly steel, that are threaten-
ing the jobs of American workers.
The President’s statement came
days after a White House meeting of top
executives of steel companies and the
United Steelworkers of America, which
helped get out the vote for Democrats
last week, playing a pivotal role with
other unions in the party’s success in
midterm elections.
After the meeting, which included
Mr. Clinton, Vice President Al Gore, and
top Cabinet officials, aides said the
White House would not grant the unions’
demand to cut off imports of steel they
say are being dumped in the American
markets. But today, the President
warned that foreign nations must “play
by the rules,” appearing to signal that
the United States would press other na-
tions to restrict their exports to the
United States. [
Author’s note: In the
end, the Clinton administration did de-
cide to limit steel imports.]
S
OURCE
: 
The New York Times,
November 11, 1998,
p A1.
I N T H E N E W S
Life in Isoland

---

1 8 8
PA R T T H R E E
S U P P LY A N D D E M A N D I I : M A R K E T S A N D W E L FA R E
Once the government imposes a tariff, the domestic price exceeds the world
price by the amount of the tariff. Consumer surplus is now area A
⫹
B. Producer
surplus is area C 
⫹
G. Government revenue, which is the quantity of after-tariff
imports times the size of the tariff, is the area E. Thus, total surplus with the tariff
is area A
⫹
B 
⫹
C 
⫹
E 
⫹
G.
To determine the total welfare effects of the tariff, we add the change in con-
sumer surplus (which is negative), the change in producer surplus (positive), and
the change in government revenue (positive). We find that total surplus in the
market decreases by the area D 
⫹
F. This fall in total surplus is called the 
dead-
weight loss
of the tariff.
D
E
F
C
G
B
A
Price
of Steel
0
Quantity
of Steel
Domestic
supply
Domestic
demand
Price
with tariff
Tariff
Imports
without tariff
Equilibrium
without trade
Price
without tariff
World
price
Imports
with tariff
2
Q
S
1
Q
S
2
Q
D
1
Q
D
F i g u r e 9 - 6
T
HE
E
FFECTS OF A
T
ARIFF
.
A
tariff reduces the quantity of
imports and moves a market
closer to the equilibrium that
would exist without trade. Total
surplus falls by an amount equal
to area D 
⫹
F. These two triangles
represent the deadweight loss
from the tariff.
Ta b l e 9 - 3