Scenario:  You are the senior trade policy adviser to the president of “Freedonia.” The president is considering signing a free trade treaty with the neighboring country of “Utopia.” Your task is to assess the potential economic and political effects of this treaty. You recognize that the two countries are quite different economically.  Your country has lots of capital (machinery) and skilled workers in comparison to Utopia, but very little farmland.  By contrast, Utopia’s economy has less capital and fewer skilled workers in comparison to Freedonia, but lots of farmland.

If the president decides to sign the treaty, it goes to Freedonia’s Congress for approval. Freedonia has a bicameral legislature, with a House of Representatives and a Senate, and the trade treaty must pass both houses.  In the House, there are more representatives that defend the interests of capitalists and skilled workers than representatives that defend the interests of farmers. In the Senate, by contrast, senators from farming states are in the majority.

Questions to be addressed in your essay:

1.  Would a free trade agreement with Utopia be good or bad for Freedonia as a whole? Why?

2. With free trade, what types of products would Freedonia export to Utopia and what types of products would Utopia export to Freedonia? Why?

3.  Which groups of people within Freedonia would support the free trade agreement and which groups would oppose it? Why?

4. Given Freedonia’s institutions, would a free trade treaty be more likely to pass or fail in Congress? Why? Name one institutional reform that could change the bill’s likelihood of passing and explain why this would affect the prospects of Freedonia adopting free trade.

5. Use at least two historical examples from the era before World War I to support your claims about the economic and political effects of freer trade.

IMPORTANT:  Although you are expected to answer all five questions, your midterm exam should be structured in paragraphs, NOT bullet points. .

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