Suppose that in the absence of trade, the U.S. price for bicycles was higher than the world price for bicycles. Would allowing international trade mean that the United States would import or export bicycles? Who in the United States would benefit and who would lose with a free trade policy, and would the gains be greater than the losses?
The United States would import bicycles as consumers demanded more bicycles at the lower world price. The U.S. price would fall to meet the world price, and U.S. consumers would gain, while U.S. producers would lose. The gains to consumers would, however, outweigh the losses to producers.
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