622 PART • Information, Market Failure, and the Role of Government a comparative advantage in making hard drives because of the sheer scale of its production capacity Finally, observe that physical parts account for just under half of the iPod’s retail price As with most products, a bundle of different services is needed to design, develop, and distribute the iPod The firms that perform those services—Apple included—also end up with a sizable share of the final selling price EX A M P L E 16.4 THE COSTS AND BENEFITS OF SPECIAL PROTECTION The demands for protectionist policies increased steadily during the 1980s and into the 1990s They remain a subject of debate today, whether out of concern for trade with various Asian countries or in relation to the North American Free Trade Agreement (NAFTA) Protectionism can take many forms, including tariffs and quotas of the kind that we analyzed in Chapter 9, regulatory hurdles, subsidies to domestic producers, and controls on the use of foreign exchange Table 16.5 highlights the findings of one study of U.S.-imposed trade restrictions.9 TABLE 16.5 INDUSTRY Book manufacturing Orange juice Textiles and apparel Carbon steel Color televisions Dairy products QUANTIFYING THE COSTS OF PROTECTION PRODUCER GAINSa ($ MILLIONS) 622 CONSUMER LOSSES b ($ MILLIONS) 1,020 EFFICIENCY LOSSES c ($ MILLIONS) 59 796 1,071 265 44,883 55,084 9,895 7,753 13,873 673 388 857 14 10,201 11,221 2,795 Meat 3,264 3,672 296 Sugar 1,431 2,882 614 Producer gains in the tariff case are defined as the area of trapezoid A in Figure 9.15 a Consumer losses are the sum of areas A, B, C, and D in Figure 9.15 b c These are given by triangles B and C in Figure 9.15 This example is based on Cletus Coughlin, K Alec Chrystal, and Geoffrey E Wood, “Protectionist Trade Policies: A Survey of Theory, Evidence, and Rationale,” Federal Reserve Bank of St Louis (January/February 1988): 12–30 The data in the table are taken from Gary Clyde Hufbauer, Diane T Berliner, and Kimberly Ann Elliott, “Trade Protection in the United States: 31 Case Studies,” Institute for International Economics (1986) The dollar amounts have been scaled to 2011 using the CPI The sugar data are from Figure 9.15