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1
● Tariffs are generally pro-producer & anti consumer.
● While they protect producers from foreign competitors, this restriction of supply
also raises domestic prices.
● Study by Japanese economists calculated that tariffs on imports of foodstuffs,
cosmetics, and chemicals into Japan cost the average Japanese consumer
about $890 per year in the form of higher prices.
● Import tariffs impose significant costs on domestic consumers in the form of
higher prices
2.
● Reduce the overall efficiency of the world economy.
● Protective tariff encourages domestic firms to produce products at home that, in
theory, could be produced more efficiently abroad.
● Inefficient utilization of resources.
Subsidy
● government payment to a domestic producer.
● Cash grants low-interest loans, tax breaks,gov equity participation in domestic
firms.
IMPORT QUOTA
● direct restriction on quantity of some good that may be imported into a country.
● Enforced by issuing import licenses to a group of individuals/firms.
● USA has a quota on cheese imports. The only firms allowed to import cheese are
certain trading companies, each of which is allocated the right to import a
maximum number of pounds of cheese each year
● Lower tariff rate is applied to imports within the quota than those over the quota.
● An ad valorem tariff rate of 10 percent might be levied on 1 million tons of rice
imports into South Korea, after which an out-of-quota rate of 80 percent might be
applied.
● Thus, South Korea might import 2 million tons of rice, 1 million at a 10 percent
tariff rate and another 1 million at an 80 percent tariff.
● Common in agriculture, where goal is to limit imports over quota.
Export tariff
Export ban
As a way of ensuring
● a sufficient supply of domestic oil
● helping to keep the domestic price down and boosting national security
ANTIDUMPING POLICIES
● Selling goods in a foreign market at below their costs of production or as selling
goods in a foreign market at below their “fair” market value.
● Fair market value of a good =greater than the costs of producing that good
because the former includes a “fair” profit margin
● unload excess production in foreign markets.
● May be the result of predatory behavior, with producers using substantial profits
from their home markets to subsidize prices in a foreign market
● View to driving local competitors out of that market.
● Predatory firm can raise prices and earn substantial profits.
● Antidumping policies are designed to punish foreign firms that engage in
dumping.
● Protect domestic producers from unfair foreign competition.
● Although antidumping policies vary from country to country, the majority are
similar to those used in the United States. If a domestic producer believes that a
foreign firm is dumping production in the U.S
● If complaint has merit, the Commerce Department may impose an anti dumping
duty on the offending foreign imports.
● represent a special tariff, fairly substantial & stay in place for up to five years.