Abstract
ABSTRACT Because of the European Union's failure to adhere to the dispute settlement panel's findings in the banana dispute, the United States imposed prohibitive tariffs (100% ad valorem) on imports of selected EU products, including Pecorino cheese, as a retaliatory trade policy permitted under WTO rules. This paper illustrates the economic impact of U.S. retaliatory policy. The estimated loss in consumer surplus for Pecorino cheese users was $4.96 million per year. As a result of U.S. policy, tariff revenue and deadweight loss were $1.86 and $3.10 million, respectively. Italian producers lost an estimated $8.55 million in revenue due to reduced exports to the United States, nearly twice the welfare loss experienced by U.S. consumers.
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