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International Trade policies deals with the policies of the national governments relating to exports of various goods and services in various countries Trade policies also aim at protecting the domestic industry from the foreign competition . Guard against dumping Promote indigenous research and development Conserve foreign exchange resources of the country

Instruments of Trade Policy:

Broadly classified into..
Tariff Non-Tariff

The word Tariff is Arabic in origin ,and derived from the Arabic ta'rif "to notify or announce that fees need to be paid The word comes from the Italian word tariffa "list of prices, book of rates, tariff is a tax or set of duties imposed on goods involved in international trade IN INDIA Tariff Commission Ministry of Commerce & Industry Government of India

What explains the difference between a tax and a tariff?

A. Taxes are paid on domestic economic activity while tariffs are paid on international trade. . B. Taxes are charged on income and wealth while tariffs are charged on sales. C. Taxes are spent on social support programs while tariffs are spent on national defense. D .Taxes are levied by CBDT and tariffs are levied by tariff commission


Import tariffs: they are the taxes that are levied on the goods when they are imported Export tariffs: they are the taxes that are levied on the goods when they leave the country Transit tariffs: they are the taxes which are imposed on the goods as they passes through one country bound to another

Types of Tariffs:
On the basis of Purpose:
Revenue Tariff:
To provide state with the revenue. A "revenue tariff" is a set of rates designed primarily to raise money for the government. A tariff on coffee imports, for example (by a country that does not grow coffee) raises a steady flow of revenue.

Protective Tariff:
To maintain and encourage those branches of home industry protected by the duties. A "protective tariff" is intended to artificially inflate prices of imports and "protect" domestic industries from foreign competition. For example, a 15% tax on agri commodity that importers formerly sold for $100 and now sell for $150. and domestic people can sell it at 100

On the Basis of quantification of tariff:

Ad Valorem Duty: Levied as the percentage of the total value of the imported common duty. An example of an ad valorem tariff would be a 15% tariff levied by Japan on U.S. automobiles. The 15% is a price increase on the value of the automobile, so a $10,000 vehicle now costs $11,500 to Japanese consumers. Specific Duty: Levied per physical unit of the imported commodity. a country could levy a $15 tariff on each pair of shoes imported,

Compound Duty When a commodity is subjected to both advalorem and specific duty

On the Basis of application:

Single Column Tariff:
A uniform rate of duty is imposed on all similar commodities irrespective of the country from which they are imported.

Double Column Tariff:

Two different rates of duty have been imposed.

Triple Column Tariff:

Two or more tariff rates are levied on each category of commodity.

Who Gain from Tariff?

Government of the importing country earns in the form of the revenue. Industries of the importing country would find market for their products as the imported goods will be expensive. Jobs in the domestic markets are saved. Business for the ancillary industry, servicing, market intermediation etc. is also protected.

Who are adversely affected?

Consumers Industries of the exporting country.

The Impact of Tariff (Tax) Barriers

Tariff Barriers tend to Weaken: 1. Balance-of-payments positions 2. Supply-and-demand patterns 3. International relations (they can start trade wars)

The Impact of Tariff (Tax) Barriers

Tariff Barriers tend to Restrict: 1. Manufacturer supply sources 2. Choices available to consumers 3. Competition

TARIFFS are mainly concerned with protecting domestic country and decrease exports To eliminate these tariffs trade blocks are formed