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Tariffs

Tariffs. Oldest, easiest to recognize forms of trade policy Specific = amount on each unit $10/ton of tea Ad valorem = percentage of value 5% of import value Raise cost of foreign goods for consumers. Raise revenue Benefit domestic producers. Hurt domestic consumers with higher prices

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Tariffs

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  1. Tariffs • Oldest, easiest to recognize forms of trade policy • Specific = amount on each unit • $10/ton of tea • Ad valorem = percentage of value • 5% of import value • Raise cost of foreign goods for consumers

  2. Raise revenue Benefit domestic producers Hurt domestic consumers with higher prices Weaken supply and demand patterns Restrict competition Often start trade war Tariff Effects

  3. Harley-Davidson • 1983 International Trade Commission put a 49.4% duty on Japanese heavy motorcycles at request when Harley could not compete • Allowed Harley to enact new management strategies without pressure from imports • Within 4 years Harley was back on feet and had highest market share • 1987 policy lifted one year early

  4. Subsidy • Government payment to domestic producer • Cash grants • Low interest rates loans • Tax breaks

  5. Benefit domestic producers Hurt foreign producers Paid for by domestic consumers in taxes Often help support inefficient industries Subsidy Effects

  6. Import Quota • Restriction on the quantity of a good that can be imported • Usually accomplished through import licensing

  7. Benefit domestic producers Increase price of goods for consumers Limit availability of goods for buyers Quota Effects

  8. Voluntary Export Restraint • Country agrees not to export more than a certain quantity of an item • Usually enacted when more restrictive tariffs or quotas are feared • Same effects as a quota

  9. Local content requirement • Some portion of good must be produced domestically • Helps form domestic industries and keep manufacturers from switching to foreign suppliers

  10. Helps domestic producers Hurts domestic consumers Local Content Effects

  11. Anti-Dumping Laws • Foreign companies can not sell goods below cost of below fair market value • Often done to get rid of excess production or drive competitors out of business

  12. Administrative Barriers • Range of activities such as taking too much time to inspect products or increasing product standards to an unreasonable level

  13. Porta-bote International • $895 motorized or sailing craft that folds to 4 inches flat and can be carried on top of a car • Japanese safety test • Japanese Coast Guard filled one boat with 600 pounds of concrete and dropped it 20 feet into the water • Boat examined for structural damage • Done twice more

  14. How do I know what barriers exist in a country? • Country Commercial Guides • US Department of Commerce

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