Tariffs: A Tool of Protectionism & Income Generation - Essay Sample

Introduction

Tariff is termed to be the tax on exports and imports between sovereign states. Tariffs regulate foreign trade and makes policies that taxes the foreign products to safeguard and encourage our domestic industries. In the past, various states made tariffs to act as sources of their income (Micevski, 2019). In the current days tariffs are widely used mechanisms of protectionism together with export and import quotas. Taking taxes on imports denotes that persons are less likely to purchase them as they gradually become more expensive. The basic intention on many states is to purchase local products rather and boost their own economy that emptying their profit margins to other foreign governments thus proving and incentive that develops production and also replaces imports with local products. Basically, the tariffs are meant to decrease the level of pressure from the foreign market competition hence reducing the trade deficit. Historically, they are justified as a way to protect growing industries and giving a chance to import substitution industrialization. Tariffs are also used to correct artificial low prices for particular imported goods to dump the export subsidies and also for currency manipulation. The chain of command in a country lays restrictions on exports by limiting the quantity of goods which is exported to a particular nation by a government (Jones, 2018). The states also enforce rules on the quantity of goods that a citizen has to import from foreign nations by imposing import duties as the home government customs authorities. The value of goods imported dictate the level of import duty to be imposed hence can also be referred to as tariff. As a foreign consumer you have to pay VAT and a value of import duty on your goods imported and when brought in the EU it’s a requirement to pay to the freight forwarder who later pays the HRMC for your sake.

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If the tariff is low the supply curve shifts accordingly and the consumers will gain more because consumer surplus will be increased.

In addition the world trade has been consisted in its results as it has drastically improved lives and the living standards of many people across the globe. The countries that have participated in various aspects to import and export goods have had a good relationship and rapport among themselves creating a great margin of profits in the trading activities. The World Trade Organization has remained as the only global organization that deals with the rules and regulation of trade among nations (Bohringer et al. 2018). The sole directives for the WTO is its agreements that are negotiated between the member countries and signed by the many world’s trading states where they are ratified and verified in their domestic governments. In the past, bilateral treaties were the way on how to regulate trade among two or more nations. Free trade developed as a dominant routine after the II World War having Multilateral treaties giving mandate to the WTO as the divine principal regime to control and regulate international trade. The WTO succeeded the agreements on trade and tariffs where it was charged with authority to oversee and adjudicate global trade. WTO negotiates and implements new trade agreements and reviews the trade policies ensuring transparency and coherence of the policies through surveying the global economic policy making. Some of the principles governing trade are nondiscrimination, binding and enforceable commitments thus enumerating an accession in the list of concessions in the tariff commitments made by members in agreement.

Domestic producers via increased prices by the rising tariffs on imported goods are not forced to reduce their item’s prices due to the consistent market competition (Irwin, 2020). The international trade results to an increased quantity of goods that domestic consumers are able to choose from thus decreasing the prices of goods by the persistent competition allowing domestic industries to import their products from foreign countries. Free trade may have promising effects of benefit but not to all parties accept that view point prompting some leaders to raise anti-trade driven notion campaigns. Foreign consumers have a wide preference and board of choices to choose from with comparison to domestic and international firms on quality and availability of goods that are provided. The intervening role of the price variations and quality attributes are therefore assessed in a study using conjoint analysis. Free trade equally stimulates the growth of an economy and maximum creation of wealth within a state’s borders. Protectionism major goal is to secure and protect a country’s economic well-being. The action makes an inclusion of the tariff which makes up imports from other nations and also to the foreign markets. The protectionism is an emergence of controversial tactic to the economists and policy makers to develop the economy by the trading business inside and outside a state’s borders. The local content requirement can be imposed by a country seeking to lessen imports through setting various requirements to manufacturing firms and industries where a certain stated parts of that product must be domestically produced (Micevski, 2019). Tariffs have a general positive and negative influence to a countries economic progress and it is a state’s responsibility to implement regulation and policies that favor growth of trade for the domestic producers and also consumers.

References

Böhringer, C., Carbone, J. C., & Rutherford, T. F. (2018). Embodied carbon tariffs. The Scandinavian Journal of Economics, 120(1), 183-210.

Irwin, D. A. (2020). Free trade under fire. Princeton University Press.

Jones, R. W., & Kierzkowski, H. (2018). The role of services in production and international trade: A theoretical framework. World Scientific Book Chapters, 233-253.

Micevski, M., Halkias, G., & Herz, M. (2019). Multiple consumer identities and the crossover effect of the EU identity in predicting domestic and foreign product preferences. Journal of Business Research, 104, 622-631.