Tariffs and World Trade
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Tariffs and World Trade
A tariff is termed to be the tax on exports and imports between sovereign states. Tariffs regulate foreign trade and make policies that tax the international products to safeguard and encourage our domestic industries. In the past, various countries made tariffs to act as sources of their income (Micevski, 2019). In the current days, tariffs are widely used mechanisms of protectionism together with export and import quotas. Taking taxes on imports denotes that persons are less likely to purchase them as they gradually become more expensive. The primary intention of many states is to buy local products instead and boost their economy by emptying their profit margins to other foreign governments, thus proving an incentive that develops production and replaces imports with local products. The tariffs are meant to decrease the level of pressure from the international market competition hence reducing the trade deficit. Historically, they are justified as a way to protect growing industries and giving a chance to import substitution industrialization. Tariffs are also used to correct artificial low prices for mainly imported goods to dump the export subsidies and also for currency manipulation. The chain of command in a country lays restrictions on exports by limiting the number of goods exported to a particular nation by a government (Jones, 2018). The states also enforce rules on the number of products that a citizen has to import from foreign countries by imposing import duties as the home government customs authorities. The value of imported goods dictates the level of import duty be imposed; hence, it can also be referred to as tariff. As a foreign consumer, you have to pay VAT and value of import duty on your goods imported, and when brought in the EU, it’s a requirement to pay to the freight forwarder who later pays the HRMC for your sake.
If the tariff is low, the supply curve shifts accordingly, and the consumers will gain more because consumer surplus will be increased.
Also, the world trade has consisted in its results as it has drastically improved lives and the living standards of many people across the globe. The countries that have participated in various aspects of import and export goods have had a good relationship and rapport, creating a high margin of profits in the trading activities. The World Trade Organization has remained as the only global organization that deals with the rules and regulations of trade among nations (Bohringer et al. 2018). The only directives for the WTO are agreements negotiated between the member countries and signed by the many world’s trading states where they are ratified and verified in their domestic governments. In the past, bilateral treaties were the way to regulate trade among two or more nations. Free trade developed as a dominant routine after the II World War having Multilateral treaties giving a mandate to the WTO as the divine principle regime to control and regulate international trade. The WTO succeeded the agreements on trade and tariffs where it was charged with the authority to oversee and decide global deal. WTO negotiates and implements new trade agreements, reviews the trade policies, and ensures transparency and coherence of the systems by surveying the global economic policymaking. Some of the principles governing trade are nondiscrimination, binding, and enforceable commitments, thus enumerating an accession in the list of concessions in the tariff commitments made by members in agreement.
Domestic producers via increased prices by the rising tariffs on imported goods are not forced to reduce their item’s costs due to the consistent market competition (Irwin, 2020). The international trade results in an increased quantity of goods that domestic consumers can choose from, thus decreasing the prices of goods by the persistent competition allowing local industries to import their products from foreign countries. Free trade may have promising effects of benefit but not to all parties accept that viewpoint prompting some leaders to raise anti-trade driven notion campaigns. Foreign consumers have a broad preference and board of choices to choose from with comparison to domestic and international firms on the quality and availability of goods that are provided. Therefore, the intervening role of the price variations and quality attributes is assessed in a study using conjoint analysis. Free trade equally stimulates the growth of an economy and the maximum creation of wealth within a state’s borders. Protectionism’s primary goal is to secure and protect a country’s economic well-being. The action makes the inclusion of the tariff, which makes up imports from other nations and foreign markets. The protectionism is an emergence of a controversial tactic to the economists and policymakers to develop the economy by the trading business inside and outside a state’s borders. The local content requirement can be imposed by a country seeking to lessen imports through setting various conditions to manufacturing firms and industries where certain stated parts of that product must be domestically produced (Micevski, 2019). Tariffs have a generally positive and negative influence on a country’s economic progress, and it is a state’s responsibility to implement regulation and policies that favor the growth of trade for domestic producers and consumers.
References
Böhringer, C., Carbone, J. C., & Rutherford, T. F. (2018). Embodied carbon tariffs. The Scandinavian Journal of Economics, 120(1), 183-210.
Irwin, D. A. (2020). Free trade under fire. Princeton University Press.
Jones, R. W., & Kierzkowski, H. (2018). The role of services in production and international trade: A theoretical framework. World Scientific Book Chapters, 233-253.
Micevski, M., Halkias, G., & Herz, M. (2019). Multiple consumer identities and the crossover effect of the EU identity in predicting domestic and foreign product preferences. Journal of Business Research, 104, 622-631.