TARIFF - INTERNATIONAL BUSINESS

REASONS FOR PROTECTION

1. SAVING DOMESTIC INDUSTRIES

Lack of-Technological skill-capital-Wide markets-Advertisements-Marketing

2.SAVING DOMESTIC EMPLOYMENT

-Labour intensive-(coir, cashwe, khadi, small

scale industries)

3. DEVELOPING INFANT INDUSTRIES – RECENTLY ESTABLISHED INDUSTRIES

(IMPORT SUBSTITUTION INDUSTRIALISATION)

SHORT RUN RESTRICTIONS

MORE PROTECTIVE ACTIONS

4. NATIONAL SECURITY –

STRATEGIC INDUSTRIES

DEFENCE INDUSTRIES

5. PROTECTING OLD & IN-EFFICIENT INDUSTRIES

Chance of modernisation

6. PRESERVING NATIONAL HERITAGE & CULTURE

Agriculturalcraft industries

7. ATTRACTING FOREIGN INVESTMENT

-Avoiding high tariff-Set up production units inside

the country-More employment

8. RETALIATING-Force the trading partner

to stick to the rules of the game

Eg: U.S.A to china - IPR

INSTRUMENTS OF TRADE POLICY OR

INSTRUMENTS OF TRADE CONTROL

ORINSTRUMENTS OF INTERVENTION ORTECHNIQUES OF PROTECTION

TARIFFS

It is a tax which is levied on goods that move internationally. It refers to duties or taxes imposed by the government on commodities which are imported into a country from abroad.

Classification of Tariffs

On the basis of the origin and destination of goods crossing the national boundary

1. IMPORT TARIFFS

•One which is levied on imports•Increases the price•Revenue to government•Job security

2.EXPORT TARIFFS

The tariff which is levied on exports

Domestic demand satisfaction

3.TRANSIT TARIFF

Which is levied on goods that pass through a nation

ON THE BASIS FOR QUANTIFICATION OF TARIFF

•AD VALOREM IMPORT DUTYFixed percentage of the CIF value

•SPECIFIC IMPORT DUTY

On the basis of number of units imported

•COMPOUND IMPORT DUTY

Combination of both

•SLIDING SCALE IMPORT DUTY

On the basis of scale

WITH RESPECT TO ITS APPLICATION BETWEEN

COUNTRIES

•SINGLE COLUMN TARIFF

Same rate to all countries

Determined by law

DOUBLE COLUMN TARIFF

Different tariff to different nations

COMMON WEALTH PREFERENCE AGREEMENT in 1932

WITH REFERENCE TO THE PURPOSE THEY SERVE

REVENUE TARIFF

Revenue to Government

Low tariff

PROTECTIVE TARIFF

Protection to domestic industries

High tariff

DUTY DRAWBACKS

Reimbursement of tariff in case of re exporting

TARIFF and ITS EFFECT

PRICE EFFECT

DIRECT RELATIONSHIP

TARIFF INCRESAES PRICE WILL ALSO INCREASE

PROTECTIVE EFFECT

For protecting domestic industries

Revenue is insignificant if the industry is fully protected

CONSUMPTION EFFECT

For reducing the consumption

Reduce the net satisfaction

REVENUE EFFECT

For increasing the revenue of the Govt.

Low tariff

REDISTRIBUTIVE EFFECT

Distribution of income from consumers to producers

COMPETITIVE EFFECT

Increasing the competitive power of the domestic industries

INCOME EFFECT

Restriction of foreign goods

Import substitution industries

More employment

More income

BALANCE OF PAYMENT EFFECT

Difference between export and import

At the time of imbalance in BOP

High tariff decrease the import

LIMITATIONS OF TARIFFS

•PROVOKE RETALIATION

•REDUCE THE OVERALL VOLUME OF WORLD TRADE

•UN EMPLOYMENT – IMPORT RELATED JOBS

•INCREASE PRICE – SOUTH KOREA US RELATION(beef)

1989 japan $890

•OVER PROTECTION

•REDUCE VARIETY OF GOODS

REFERENCES

1. INTERNATIONAL ECONOMICSDr.S.S.M.DESAIDr.Nirmala Bhalerao

2. INTERNATIONAL BUSINESSSanjay MisraP.K.Yadav

3. INTERNATIONAL BUSINESS Roger Bennet

4. NEWS PAPERS