than 30 percent by late 1998. The US Congress quickly opened up dumping investigations. In March 1999, the US House voted to allow quotas and tariffs on steel imports from various countries. In one case, the Congress to impose duties of over 100 percent on Japanese steel. The US government is also investigating India, Korea, Indonesia, and the Czech Republic and is also threatening antidumping measures. If the Japanese claim that they are simply more efficient is true, the losses produced by the US slapping on tariffs can be shown in the Ricardian trade model. By having the US produce more of a good that it does not have a comparative advantage in producing, it and Japan in general will less well-off. Graph 1 and 2 demonstrate this, using steel and wheat as the two commodities. Japan has the comparative advantage in producing steel; the US has the comparative in wheat. If there is no trade, both countries ppf would be the solid lines in their respective graphs and they would produce at point A on indifference curve y0. But if they specialized in the products they have the comparative advantage in, their ppf's will shift outward to the dotted lines. They will produce at point B and be on a higher indifference curve, y1. Since they are not completely specialized they cannot obtain the indifference curve y1; they will be on a curve in between the two. The tariffs and quotas would actually hurt some US industries; the ones that consume steel. Since the US has mainly considered placing tariffs or countervailing duties on steel imports (which work much in the same way that tariffs do), Graph 3 shows the losses and gains for the US if it slaps a tariff on steel. Pw is the world price and domestic (US) price without the tariff. Once the US places a tariff on steel, the domestic price changes to Pd. Pf is the price of steel in the trading partners market so that the market clears. As the graph indicates, area a is the producer surplus and area c...
