close
This essay has been submitted by a student. This is not an example of the work written by professional essay writers.

The Effect of Tariffs on Country Development

downloadDownload printPrint

Pssst… we can write an original essay just for you.

Any subject. Any type of essay.

We’ll even meet a 3-hour deadline.

Get your price

121 writers online

The Effect of Tariffs on Country Development essay
Download PDF

Tariffs are the most common kind of barrier to trade; indeed, one of the purposes of the WTO is to enable Member countries to negotiate mutual tariff reductions. A tariff is a tax imposed on the import or export of goods.In general parlance, however, a tariff refers to “import duties” charged at the time goods are imported.Tariffs have three primary functions: to serve as a source of revenue, to protect domestic industries, and to remedy trade distortions (punitive function).

The Effect of Tariffs

The most basic effect that an import tariff has is to raise domestic prices in the country imposing the tariff. In “small countries” (defined for our purposes as countries that do not have an influence on international prices), the rise in domestic price is equivalent to the amount of the tariff. In “large countries” (those that have an impact on international prices), the price rises somewhat less than the amount of the tariff because part of the tariff is reflected in a reduction in international prices.

A tariff-induced price rise creates a gap between prices in the importing and exporting countries. This in turn causes supplies (production) to rise in the importing country, while demand (consumption) falls, which is the essence of the “industrial protection” function of tariffs. Obviously, a tariff also generates revenues for the government of the importing country (revenue function). Tariffs therefore benefit the government and producers of the importing country in the form of tax revenues at the expense of its consumers in the form of higher prices.

Because tariffs bring different benefits and costs to different groups, the net cost to the importing country is the “cost to consumers minus profits to producers minus government revenues.” This is equal to the sum of the “efficiency loss” caused by distortions to the pricing system and the “profits from improved terms of trade” brought by a reduction in international prices.

Therefore, for “small countries” which see no improvement in their terms of trade because their tariffs have no influence on international prices, the benefits from a tariff will necessarily be negative. However, for “large countries” that can expect an improvement in terms of trade because part of the tariff will lead to a reduction in international prices, the pros and cons are not so easily weighted. Economists sometimes refer to “optimal tariffs” that are low enough for the improvement in the terms of trade to exceed the costs, thereby maximizing economic welfare.

The degree of protection afforded by a tariff (the effective protection rate) is not equal to the tariff rate. The first reason for this is because of the potential influence from an improvement in the terms of trade. The second reason is that the effective protection rate will differ depending on which stage of the production process the tariff is applied (tariffs on parts or tariffs on finished goods). it, therefore, point out that even a relatively low tariff rate can function adequately as a means of protecting domestic industry

infoRemember: This is just a sample from a fellow student.

Your time is important. Let us write you an essay from scratch

100% plagiarism-free

Sources and citations are provided

Find Free Essays

We provide you with original essay samples, perfect formatting and styling

Cite this Essay

To export a reference to this article please select a referencing style below:

The Effect of Tariffs on Country Development. (2019, January 15). GradesFixer. Retrieved June 11, 2021, from https://gradesfixer.com/free-essay-examples/the-effect-of-tariffs/
“The Effect of Tariffs on Country Development.” GradesFixer, 15 Jan. 2019, gradesfixer.com/free-essay-examples/the-effect-of-tariffs/
The Effect of Tariffs on Country Development. [online]. Available at: <https://gradesfixer.com/free-essay-examples/the-effect-of-tariffs/> [Accessed 11 Jun. 2021].
The Effect of Tariffs on Country Development [Internet]. GradesFixer. 2019 Jan 15 [cited 2021 Jun 11]. Available from: https://gradesfixer.com/free-essay-examples/the-effect-of-tariffs/
copy to clipboard
close

Sorry, copying is not allowed on our website. If you’d like this or any other sample, we’ll happily email it to you.

    By clicking “Send”, you agree to our Terms of service and Privacy statement. We will occasionally send you account related emails.

    close

    Attention! This essay is not unique. You can get a 100% Plagiarism-FREE one in 30 sec

    Receive a 100% plagiarism-free essay on your email just for $4.99
    get unique paper
    *Public papers are open and may contain not unique content
    download public sample
    close

    Sorry, we could not paraphrase this essay. Our professional writers can rewrite it and get you a unique paper.

    close

    Thanks!

    Your essay sample has been sent.

    Want us to write one just for you? We can custom edit this essay into an original, 100% plagiarism free essay.

    thanks-icon Order now
    boy

    Hi there!

    Are you interested in getting a customized paper?

    Check it out!
    Having trouble finding the perfect essay? We’ve got you covered. Hire a writer
    exit-popup-close

    Haven't found the right essay?

    Get an expert to write you the one you need!

    exit-popup-print

    Professional writers and researchers

    exit-popup-quotes

    Sources and citation are provided

    exit-popup-clock

    3 hour delivery

    exit-popup-persone