Subject Matter of tariff Regulation

TARIFF REGULATION

Subject Matter Of Tariff Regulation

Impact Of The Tariff On The Economy Of A Small Country

Weighted And Unweighted Average Tariff

SUBJECT MATTER OF TARIFF REGULATION

Key words:

Trade policy: Autarky, Protectionism, Free trade,

Ad valorem tariff, Specific tariff

Though free trade is better than autarky (the policy of trade economic isolation), a nation can try to increase its welfair at the expense of other nations by restricting trade. Trade restrictions are classified as tariff and nontariff.

Tarrifs are imposed on imported products to make them relatively more expensive than comparable domestically produced goods. Such taxes serve to protect local companies from foreign competition in the domestic consumer market. The ad valorem tariff has received the most attention. Ad valorem tariff is expressed as a fixed percentage of the commodity value and is usually imposed to limit the volume of imports. Specific tariff – a tariff stipulated as a money amount per physical unit of import.

Since the mid-1970s the number and importance of nontariff restrictions in the form of technical, administrative and other regulations have increased significantly (new protectionizm).Trade in agricultural commodities is also subject to many quantitative restrictions and other nontariff trade barriers.

QUESTIONS:

1. Why do nations restrict international trade?

______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

2. Complete the definition below:

Protectionism is ____________________________________________________________________________________________________________________________________________

3. What kinds of trade policies do you know?

_________________________________________________________________________________________________________________________________________

Exercise. The demand and supply dynamics in the market of transistor radio receiver in U.S. is as following:

Price, $	Demand, mln. units	Supply, mln. units

The demand and supply dynamics in the market of transistor radio receiver in Japan is as following:

Price, $	Demand, mln. units	Supply, mln. units
	2,5
	2,0
	1,5
	1,0

Assume that free mutual trade is introduced in these countries.

Please, answer the questions:

1) What is the equilibrium price for radio receiver? _____________

2) Which country exports radios to another country? ____________

3) How much is the volume of exports? ______________________

4) Assume that the United States would introduce an import duty of $5 per 1 unit radio receiver. Please, estimate the consequences for imports-exports?

ANSWERS:

1) The equilibrium price: Qd(a) = Qs(a) =____ mln. units; Pe = $ __

Price, $	Aggregate Demand, mln. units	Aggregate Supply, mln. units

2) ________ (country) exports radios to _______ (country) where the domestic demand for the radios at the equilibrium price is Qd = ____ mln. units and the domestic supply is Qs = ______ mln. units. 3) So, the demand exceeds the supply for ____ mln. units, which is imported from _______ (country), where the domestic supply exceeds the domestic demand (Qs = ____ mln. units ___ Qd = ____ mln. units).

4) If the United States would introduce an import duty of $5 per 1 unit radio receiver the price for the radios in the U.S. market will __________ (increase, decrease) up to $____. In this market situaton the __________ (demand, supply) will exceed the __________ (demand, supply) for ___ mln. units. So, the trade between countries will _________________ (drop, stop, grow).

2. IMPACT OF TARIFF ON THE ECONOMY OF A “SMALL” COUNTRY

Key words:

“Small” country, Domestic demand, Domestic supply,

Equilibrium price, Foreign supply, Import,

Domestic producer, Domestic consumer, Foreign producer,

Consumer surplus, Producer surplus,

Tariff, Effects of tariff, Deadweight loss, Prohibitive tariff

In international economics country is considered to be “small” if demand for import commodity do not effect world prices (prices on the world market remain unchanged).When a small nation imposes a tariff, it will not affect world prices.

Imposed tariffs usually result in:

1. ______ domestic price for importable commodity, _______ domestic consumption, _______ domestic production,_______ imports of the commodities.

2. Revenues collected by the government.

3. Redistribution of income from consumers (who must pay a higher price) to producers (who receives the higher price).

4. Protection cost or deadweight loss – the real losses to a nations’s welfair because of inefficiencies in production and consumption.

Generally tariffs restrict international trade flows and the benefits from specialization.

Let’s consider “small” country with cloth industry.

Дата добавления: 2015-11-14