countries feel that developed countries are trying to keep the third world countries out of their markets. This could result in a stunt of economic growth for these developing countries, as they are unable to develop secure and stable long term industries. "The imposition or even the threat of imposition of AD duties has a serious adverse effect on the functioning of small and medium size firms, resulting in a fall in production, heavy unemployment and declines in incomes and increases in poverty levels."( Raghavan). To start the examination of a third world country's argument, Graph 4 shows the definite losses that a small trading partner suffers (like India or another developing nation) when an tariff is slapped on its exports. Steel is the specific example in this case, though it need not be. Pw is the world price for steel; Pf is India's domestic price as a result of the tariff. The only gain for India is the consumer surplus gain of area 1. But that gain is more than negated with the producer surplus loss of areas 1,2,3, and 4. The net loss is 2,3, and 4. Thus, India overall is definitely harmed. The producer surplus loss is particularly troublesome, since many of these industries are just starting out. The local economy is more dependent upon their success. The Offer curves graph shows one major result of a large country slapping a tariff on a small trading partner (in the specific market)- a decline in the terms of trade for the small country. In graph 5, the US imports steel from India and exports food. Line A is the original international price line with equilibrium achieved at point A. When the US slaps a tariff on steel, its Offer curve shifts backward to the Offer curve with tariff. Line B in now the new price line with equilibrium at point B. The relative price pf/ps with a tariff is greater than pf/ps without the tariff. Thus, the terms of trade for India have declined for India. And as Ricardian theory shows, a long term...
