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