In recent years China has been importing steel from India. Explain how the import of steel by China will affect:
steel companies in China.
Steel companies in China will face competition against Indian producers. Similar to how Indian toy makers faced losses when Chinese toys entered the market, Chinese steel companies may face losses as they have to compete with imported steel.
steel companies in India.
Steel companies in India will get an opportunity to expand business. Just as Chinese toy makers benefited from exporting to India, Indian steel producers will benefit from selling their steel in the Chinese market.
industries buying steel for production of other industrial goods in China.
Industries buying steel in China will have a greater choice between domestic and Indian steel. The context suggests that prices of similar goods tend to become equal, so buyers can purchase steel at competitive prices.
Explanation
The textbook context uses the example of Chinese toys in India to explain the impact of foreign trade. By applying this analogy inversely (India exporting steel to China), we can deduce the effects: (a) Domestic producers in the importing country (China) face competition and potential losses, (b) Producers in the exporting country (India) get a chance to expand business, and (c) Consumers/buyers in the importing country benefit from greater choice and competitive prices.