Chapter 4:Tariffs

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Question:Which of the arguments for tariffs do you feel are most relevant in today's world?

Discussthe concept(s) relating to the above question. In your analyses, use some of the terms and theories in thee-Textto support your argument(s).

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Chapter 4 - Tariffs Summary

1. Even though the free-trade argument has strong theoretical justifications, trade restrictions are wide- spread throughout the world. Trade barriers consist of tariff restrictions and nontariff trade barriers. 2. There are several types of tariffs. A specific tariff rep- resents a fixed amount of money per unit of the imported commodity. An ad valorem tariff is stated as a fixed percentage of the value of an imported commodity. A compound tariff combines a specific tariff with an ad valorem tariff. 3. Concerning ad valorem tariffs, several procedures exist for the valuation of imports. The FOB measure indicates a commodity's price as it leaves the exporting nation. The cost-insurance-freight (CIF) measure shows the product's value as it arrives at the port of entry. 4. The effective tariff rate tends to differ from the nominal tariff rate when the domestic import- competing industry uses imported resources whose tariffs differ from those on the final commodity. Developing nations have traditionally argued that many advanced nations escalate the tariff struc- tures on industrial commodities to yield an effec- tive rate of protection several times the nominal rate. 5. American trade laws mitigate the effects of import duties by allowing U.S, importers to postpone and prorate over time their duty obligations by means of bonded warehouses and foreign trade zones. 6. The welfare effects of a tariff can be measured by its protective effect, consumption effect, redistributive effect, revenue effect, and terms-of-trade effect.