In a press release on 17 April 1997, the Australian Democrats announced their support for a tariff on sugar imports into Australia. The tariff on sugar at the time was $55 per tonne.
a Illustrate the effect of this tariff on the Australian sugar market. Label the relevant prices and quantities under free trade and under the tariff.
b Analyse the effects of the sugar tariff using the tools of welfare analysis.
c The Cairns Council claimed that the removal of the sugar tariff would lead to a loss of $2 million in revenue to five local sugar mills and the loss of many jobs. Do you think that these claims justify maintaining the tariff? d Many overseas countries also protect their local sugar industries. The Wall Street Journal (26 June 1990) stated that the protection of the US sugar industry â€˜has helped make possible the spectacular rise of the high-fructose corn syrup industryâ€™. Why would protecting the sugar industry have this effect? (Hint: Do you think sugar and corn syrup are substitutes or complements?)