Question 1

Assume that South Africa imposes a tariff on imported raw materials used to make BMW X3s, and also imposes a tariff on imported BMW X3s. In addition, assume that the import price of a BMW X3 is R800 000 and the price of imported raw material required to make the car locally is R400 000.

QUESTIONS

1.1 Calculate the rate of effective protection if the tariff on the imported raw materials is 0% and the tariff on an imported BMW X3 is 60%. Show all the steps.

1.2 Calculate the rate of effective protection if the tariff on the imported raw materials is 5% and the tariff on an imported BMW X3 is 20%. Show all the steps.