The U.S.-Colombia Trade Promotion Agreement was signed on November 22, 2006, in Washington, D.C. This comprehensive trade agreement eliminated tariffs and other barriers to goods and services. Colombia will immediately eliminate tariffs on wheat, barley, peanuts, and many other products in which Columbia does not have a comparative advantage. This policy means that the price of peanuts in Columbia will become

Question

Quizplus · Accepted Answer

By eliminating tariffs on peanuts, Colombia allows the price of peanuts to adjust to the free trade price, which is typically lower than the domestic price when tariffs are in place. This is because tariffs act as a tax on imports, raising their price in the domestic market. Removing these tariffs allows imported goods to be sold at their global market price, which is the free trade price.

The US-Colombia Trade Promotion Agreement Was Signed on November 22, 2006