Essay on Re: Tariffs and Non-Tariff Barriers

Submitted By Jvjvr1
Words: 733
Pages: 3

Everyone basically knows the tariff is a tax or duty placed on an imported good by a domestic government. Although tariffs do not apply to domestically produced goods, the rate for each tariff is different for all goods made. Tariffs have been an effective tool for governments in order to protect wavering domestic industries from foreign competition, to protect aging and ineffective domestic industries from foreign competition, and to protect dumping by foreign companies or governments. A little-known fact about dumping is that the price that is offered in the foreign market is “too low” which means a price below cost, so the producer is losing money. Very often there is a double impact to the country introducing the tariff that is not trivial. 1. The impact to the country that has a tariff imposed on. 2. The impact to the country imposing a tariff.
Inevitably in every instance the imposing tariffs causes a net loss to both the economy of the country making use of the tariff and also the country the tariff is levied upon. The World Bank has estimated and calculated that in the event of all barriers to trade like tariffs were evaporated, the world economically would expand by $830 billion by 2015 (http://economics.about.com/).

Analysts who use speculative rules to outline an economy of a foreign country could provide many reasons why a foreign tariff hurts the economy of a country. The logical assumption regarding tariffs could be that they raise the cost of domestic producers that causes them to provide less sales in those foreign markets. For instance, in the lumber market tariffs put a heavy price on North American jobs, which inevitably cuts production due to the reduction in demand. With very few exceptions tariffs cause devastation to the country that imposes them and costs outweigh the benefits. One of these few benefits from the evolution of tariffs is that the domestic producers now have reduced competition in their home market. This reduction causes prices to rise. With everything being equal, the sale of domestic products will also rise. In turn many workers are hired domestically and spending tends to rise. For every government that introduces a tariff revenue also creates a benefit to the economy. Because of the increase in price for the good or service the consumer is forced to make a choice of either buying less or not buying. Generally the increase in revenue for the government does not typically offset the loss. An argument could be made that any mechanism designed to stall international trade will negatively affect economic growth. In this way, tariffs will be harmful to the country imposing them. Throughout the international community tariffs have done more harm than good. Not only the United States, but Europe and Japan have lost hundreds of thousands of dollars per job saved through tariffs. Recent