ABSTRACT
Compare the trade-tax-distorted offer curve with the free-trade offer curve in general and then predict the effect of import and export taxes on the international price ratio, that is, the barter terms of trade of the trade-tax-imposing country. Let economists extend the analysis of import and export taxes to a two-country model (A and B) where either country's actions are substantial enough to affect international prices. Again, international equilibrium is usually portrayed in terms of offer curves, which economists can derive under free-trade conditions. But how can offer curves be derived when import and export taxes interfere with the free flow of trade? In what follows, assume that only country A imposes trade taxes. The offer curve of country B is thus assumed given and invariant. Economists have enough information to derive a trade-tax-distorted offer curve, that is, the offer curve that shows the willingness of a country to export and import commodities at world prices.
