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Trade policies have greatly affected the economic performance of many countries in many ways and are regarded as the most important component of developing and less developed countries. Considering the impacts of Tariffs on economic developments have been a significant factor in the developing nations and has also reflected its importance on many countries in an effective manner. Hence, this research paper is based on the trade policies such as the comparison of tariffs between Fiji and Australia, while focusing on how these countries have achieved its tariff rates on its imports and how the countries have used its tariff rates on imports of its goods and services. It will also show the effects, consequences and implications of tariff
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All countries has some form of trade policy in place, with public officials formulating the policy which they think would be the most appropriate for their country. The main aim of this trade policy is to assist nation’s international trade run more smoothly by setting proper standards, rules and goals that can be understood by potential trading partners. Some examples of trade policies are import and export taxes, inspection regulations and quota. Many countries protect their local industries by imposing some form of trade policy which places a heavy burden on importers. The issue of safety is also associated with trade policy. Different countries have different regulation on product safety, when goods are imported into a country with stiff standards, representatives of that nation may demand the right to inspect the goods, to confirm that they conform with the product safety standards which have been laid out. Security is also an issue, with nations wanting to protect themselves from potential threats while maintaining good foreign relations with frequent trading …show more content…
For small countries like Fiji an increase in domestic price is the same as the amount of tariff being imposed. In big countries an increase in price is less than the amount of tariff because portion of tariff is reflected in a reduction in international prices. It creates a gap between prices in the importing and exporting countries. The effect of a tariff to Fiji’s economy is the cost to consumers minus profit to producers minus government revenue. This is also known as the efficiency loss which is caused by distortions to the pricing system and profits from improved terms of trade. A country like Fiji who relies heavily on imports and where exports is less than imports, tariff has no influence on international prices and the benefits from tariff will necessarily be negative. Tariffs are a benefit to the domestic producers who now face reduced competition in their home market. This leads to increasing the prices which further results in domestic producers hiring more workers and consumer spending increases. Once tariff is imposed the prices of those good tend to rise, consumers are forced to either buy less. The increase in price can be thought of as a reduction in consumer income. As a result consumers are purchasing less, domestic producers are selling less, causing a decline in the economy. Tariffs are imposed to boon domestic manufacturers and workers in certain industries
·Tariffs doubly injured the majority of citizens, first by imposing heavy import taxes that were passed on to consumers and then by reducing the incentive for American manufacturers to produce goods at a lower cost than imports
Office of Industries, U.S. International Trade Commission.(2009).Export controls: an overview of their use, economic effects, and treatment in the global trading system. Retrieved from United States International Trade Commission http://www.usitc.gov/publications/332/working_papers/ID-23.pdf
When people in America see foreign goods for outrageous prices and then they see American goods for normal prices, they are going to buy American products. Unfortunately, this is not the only effect of a protectionist policy. Foreign nations often get upset at the increase in American tariffs and respond by increasing their own tariffs on American goods. This weakens the sales of American goods to foreign nations. In order for the United States to have a favorable balance of trade, then they must have strong exports.
Tariffs are perhaps the most common way to restrict, or at least slightly discourage, foreign imports. Tariffs are, quite simply, taxes on imported goods. The thought behind imposing tariffs upon these goods is that it will cost more for foreign producers to sell their goods in the United States. However, the tariff is often passed down to the consumer. Even if the buyer can afford the cheaper American substitute for the product, the consumer is still robbed of fair choices between substitutes which throws off the fundamental forces of the market. Thus goes the anti-tariff argument. [2] Tariff-based protectionism does have its benefits, though. Due to fluctuations in currency prices, it is sometimes possible for foreign exporters to charge unnaturally low prices for their products. This is called dumping and will greatly reduce the sales of the domestic competitor. A tariff can be added to artificially raise the price of the foreign product. While this comes at the expense of consumers who wish to buy the cheapest products, it benefits American businesses and thus can indirectly benefit cons...
As illustrated in Fig.1, the domestic price before trade is Po with quantity produced at Qdo. After trade, which leads to a shifting out of the supply curve, the price falls to the world level of Pa, where quantity consumed is Qa, of which only Qda is produced domestically. Domestic producer have lost production and their revenue has fallen to Pa*Qda. Therefore, some countries feel the need to protect their own industries or production lines from foreign competition by imposing tariff. When a tariff is imposed, supply curve is shifting in from Sd + f to Sd+f+t, leading to a drop in quantity consumed at Qb, which means domestic producers are increasing production to Qdb. Also, their total revenue will rise to Pb*Qdb. At that time, the government will receive the revenue from the difference of Qb and Qdb multiplied by price Pb-Pa. The consumption will decrease because there is less of the product and the product is set a higher price. Indeed, foreign exporters will receive Qb-Qdb times Pa. The tariff is more effective the more elastic the demand curve is.
Not only did removing the tariffs make it possible for companies and manufacturers of Canada and Mexico to increase profits it also lowered to price of foreign goods. These new lower prices were now able to compete with the domestic products in the United States.
The idea of the globalisation of Australian businesses, the process where businesses develop themselves internationally is one of the main issues in our current society. The concept of globalisation has occurred due to many factors, such as reduced trade barriers, a reduction in tariffs and quotas, new developments in technology and also new innovations in transportation technology. These factors that have caused globalisation can result in many consequences, both positive and negative. These consequences are free trade caused by a reduction in tariffs and environmental costs such as pollution caused by factories and greenhouse gasses causing global warming.
level. The sand is Both developed and developing countries benefit from tariff reduction. The consumer will have more choices with more products and a wider price range.... ... middle of paper ... ... Retrieved from http://www.oecd-ilibrary.org/docserver/download/0109121e.pdf?expires=1394821453&id=id&accname=guest&checksum=148EDDDFD930AFCF166F34498B8601B6.
They explain that, with the reduced or zero tariffs imposed making foreign suppliers easily lowering their prices, local companies have to compete with the prices, which they should do even if it is difficult for them, or consumers will go for imported goods over their locally produced products- Opponents of free trade say that with the increasing competition this treaty offers, some businesses might close down or decide to do business elsewhere. When this happens, workers will be displaced. Regardless of the reduced prices, this will still have an effect on these workers because they will be unemployed or paid with lower wages. - the opponents of free trade will continue to espouse the old argument that "the jobs created by globalization are often less sustaining and secure than the livelihoods abolished by it [in poor countries]." (froning)
In order for international trade to work well, governments must allow the world market to determine how goods are sold, manufactured and traded for all to economically prosper. While all nations may have the capability to produce any goods or services needed by their population, it is not possible for all nations to have a comparative advantage for producing a good due to natural resources of the country or other available resources needed to produce a good or service. The example of trading among states comprising the United States is an example of how free trade works best without the interve...
We begin our study of free trade by understanding the four principles of individual decision making.... ... middle of paper ... ... Edge, Ken, “Free trade and Protection: advantages and disadvantages of free trade” NSW HSC online http://www.hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html#more Accessed November 29, 2011. Net Aparijita, Sinha, “What are the disadvantages of free trade?
Firstly, what should be noted here is that international trade has been providing different benefits for firms as they may expand in different new markets and raise productivity by adopting different approaches. Given that nowadays marketplace is more dynamic and characterized by an interdependent economy, the volume of international trade has grown substantially in recent years, reducing the barriers to international trade. However, after experiencing the economic crisis that took its toll in 2008 many countries adopted a different approach in terms of trade barriers by introducing higher tariffs in order to protect domestic firms from foreign competition (Hill). Secondly, in order to better understand the implications of the political arguments for trade it is essential to highlight the main instruments of trade policy (See appendix 1).
International trading has had its delays and road blocks, which has created a number of problems for countries around the world. Countries, fighting with one another to get the better deal, create tariffs and taxes to maximize their profit. This fighting leads to bad relationships with competing countries, and the little producing countries get the short end of this stick. Regulations and organizations have been established to help everyone get the best deal, such as the World Trade Organization (WTO), but not everyone wants help, especially from an organization that seems to help only the big countries and those they want to trade with. This paper will be discussing international trading with emphasis on national sovereignty, the World Trade Organization, and how the WTO impacts trading countries.
Free trade is a policy that relies on the concept of comparative advantage that when comparing two countries one of those countries will have the capability to make a product that is better than the other country. So it is best if each country focuses its efforts and resources into one product to increase the economic activity for both countries. The determination of who produces a product better is based on the open market without intervention from a government who may try to control a trade by imposing government protective measures such as tariffs. The World Trade Organization has been tasked with monitoring free trade, but it has been noted that their policing has not been effective to stop such interventions. Free trade not only relies on a laissez-faire approach but also on assumptions of conditions. The assumptions used by many for economic theories are not always accurate but rather the justification for using the assumptions is so that economic theories can be applied for the greater good of an economy.
International trade is an economic practice where countries can import and export goods with no concerns to government intervention which includes tariffs and import/export bans or limitations. International trade has several advantages on developing countries; who are nations with low levels of economic resources or low standard of living. Developing countries can advance their economy through strategic free trade agreements. Free trade generally improves the quality of life of poor nations. Nations can import goods that are not easily available within their borders; importing goods may be cheaper for than trying to produce consumer goods. Many developing nations do not have the production procedures available for translating raw materials into valuable goods.