StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Pros and Cons of Tariffs - Essay Example

Cite this document
Summary
The author of the paper will evaluates all pros and cons of tariffs referring to different authors which studied this issue. The author has rightly presented that tariffs offer many advantages, especially for domestic businesses, and producers in terms of decreased competition locally…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER97.2% of users find it useful
Pros and Cons of Tariffs
Read Text Preview

Extract of sample "Pros and Cons of Tariffs"

Pros and Cons of Tariffs al Affiliation: Pros and Cons of Tariffs Tariffs offer many advantages, especially for domestic businesses, and producers in terms of decreased competition locally. As competition in the local market goes down, it causes price fluctuations, which creates more job opportunities for residents. Governments also benefit from tariffs since they act as a source of revenue, thereby boosting the economy. Tariffs on imports also help to control the inflow of environmentally harmful and technologically outdated goods into a country. However, heavy duties reduce specialization and production, foreign exchange, and economic growth. Although tariffs are advantageous to a country, they also have disadvantages and hence need proper regulation and implementation. Tariffs help governments reduce competition from foreign companies to allow more opportunities for the growth of domestic industries and increased employment opportunities. As the government imposes a tax on imported goods, the foreign suppliers find it hard to supply to the locals (Taussig, 2010). Thus, domestic producers receive a favorable price for their products and services since the market is unsaturated with goods. The local producers also produce and sell large quantities since the demand is high among the local market. Consequently, they become motivated to provide more products and services, thereby leading to economic growth and loyalty to domestic products. Tariffs may thus enable job retention and creation since local businesses will grow to an extent of employing more people to handle their goods and services. Governments also impose tariffs on imported and exported products as one of the sources of revenue. The taxes help the government to support its many activities and functions. In fact, approximately 2% of the total government revenue comes from customs duties and taxes. Hence, imposing duties on exports and imports allow the government to fund economic developmental projects (Taussig, 2010). Such projects include building of infrastructures like roads, maintaining social amenities, establishing and maintaining institutions, and paying public workers. Consequently, local businesses and foreign companies will find it easy to set up and conduct business operations in the country. They enable the country to spearhead the economic development and attract investments both from within and outside. Therefore, eliminating taxes such as tariffs can adversely affect the government. Tariffs are also useful in controlling and minimizing the inflow of imported goods whose technology is outdated. Vernon (2013) says that some developed countries may decide to dump products, whose technology belong to many years ago, to less developed countries. Such products include electronic gadgets like computers, radio, television sets, printers, and mobile phones. They also include motor vehicles and many other technological devices. These goods may have only been useful some years ago in the country of origin. However, technological advancement may have overtaken such goods. If the country finds a gap to get the goods from the country at a profit, it may quickly grab that opportunity. When such products enter and flood a second country, the country will virtually remain behind in technology, thus hindering economic growth. Other countries may have modern technologies, yet the country still relies on outdated technologies. The country may not compete favorably with other countries, leading to slow economic growth. Additionally, controlling and minimizing the entrance of goods that are harmful to people and the environment require imposition of heavy import tariffs. If the government fails to control environmentally non-degradable products, foreign countries may find it easier to dump them to the state (Taussig, 2010). Other products such as cigarettes are harmful to the health of people. Consequently, the government has to impose heavy tariffs on such products to discourage their purchase and use in the country. Empirical and theoretical studies in the contexts of both environmental and eco-dumping races towards environmental protection support eco-tariffs (Taussig, 2010). They suggest that steps in the form of eco-tariffs may help in improving environmental welfare and quality since they discourage environmentally harmful production. However, imposing high tariffs may lead to reduced specialization and thus low production since it hinders free trade. Nations that enjoy a comparative advantage in producing certain commodities may find it hard to export such goods if the destination countries impose heavy import tariffs on the particular goods (Jones, 2001). Consequently, heavy tariffs in importing countries reduce specialization and hinder an exporting country from taking advantages of efficiencies emanating from increased input and economies of scale. The result is shrinking of international trade, leading to decrease in local firms’ market. As the market for goods shrink, there is a surplus of goods, leading to firms plummeting into significant financial losses. The firms will thus reduce production due to high average costs. The trend may ultimately have an effect on the exporting country and to an extreme extent, result in job layoffs. As a country imposes heavy tariffs on imports, local consumers may not get access to an increased variety of quality goods and services at a reduced price. Heavy duties may hinder more productive and competitive foreign companies from entering a local market. If a country that lacks a comparative advantage in producing certain goods and services imposes heavy import tariffs on them, the goods may be limited in that country. According to Jones (2001), local firms cannot produce products and sell at a fair price and quality if the country lacks economies of scales and the necessary inputs. Additionally, heavy tariffs on imports may encourage local companies to act in a monopolistic manner since they receive minimal competition from foreign firms. They may end up exploiting customers by raising prices and selling products in reduced quantity and quality. The customer experience may also be of inferior quality. An exporting country may experience reduced foreign exchange when countries of destination for their goods impose heavy import taxes on the goods. The exporting country will not get enough hard currency from the importing foreign countries since the countries have discouraged its sales to them (Vernon, 2013). Consequently, the exporting country may find it hard to pay for its imports from the other countries. As a result, heavy tariffs on an exporting country’s goods may hinder foreign exchange gains for that country. Thus, the country may thus experience unfavorable balance of trade payments and may fail to compete favorably in the international trade. For example, the U.S.A. has to export the cars that it manufactures to a country like Kenya to get foreign money. It may thus use that money to purchase agricultural produce from Kenya. If Kenya imposes heavy taxes on the cars, the United States may find it hard to sell the cars to Kenya. Hence, it may fail to get enough Kenyan money to purchase agricultural produce. Employment opportunities and thus economic growth may reduce among local people of a country that imposes heavy tariffs on imports. International free trade creates employment as foreign firms employ workers among locals to handle and distribute their products and services (Vernon, 2013). When the local government imposes high tariffs on such goods, the foreign firms may reduce and even quit operations in the country. The firms will consequently have to lay off local workers to reduce further expenses and maintain its profits. The workers that lose their jobs will end up not having a source of income and may depend on the working class for their survival. The overall effect is low economic effect due to reduced living standards among locals and low real income. The government use tariffs to enable it get revenue and fund its projects. Tariffs also allow the government to control and limit harmful and outdated goods from entering the country. They also minimize competition and allow local producers to grow. However, tariffs can be disadvantageous since they can discourage specialization and production. They can lead to loss of jobs and reduced foreign exchange. Therefore, a country should consider all factors, pros, and cons of tariffs in establishing the tariff rates on its imports and exports to ensure the growth of the economy. It ensures that customs authorities accurately follow the set tariff rates. Otherwise, the country may suffer if there is a lack of proper regulations on taxes. References Jones, R. (2001). Comparative Advantage and the Theory of Tariffs: A Multi-Country, Multi-Commodity Model. International Trade, 24(4), 20-31. Taussig, F. W. (2010). International Trade (2nd ed.). New York: Macmillan. Vernon, R. (2013). International investment and international trade in the product cycle. The International Executive, 23(5), 20-31. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Pros and Cons of Tariffs Essay Example | Topics and Well Written Essays - 1250 words”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1695521-pros-and-cons-of-tariffs
(Pros and Cons of Tariffs Essay Example | Topics and Well Written Essays - 1250 Words)
https://studentshare.org/macro-microeconomics/1695521-pros-and-cons-of-tariffs.
“Pros and Cons of Tariffs Essay Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.org/macro-microeconomics/1695521-pros-and-cons-of-tariffs.
  • Cited: 2 times

CHECK THESE SAMPLES OF Pros and Cons of Tariffs

Planning Compulsory Purchase Act 2004

There are varying pros and con's that this research intends to pinpoint through the aims of the new Planning Compulsory Purchase Act of 2004.... Also, it helps in substantiating the pros and con's involved.... There are also quite a number of pro's associated and some con's as well, mainly the cons falling into an area of delay with construction and expansion procedures....
5 Pages (1250 words) Essay

Foreign Market Analysis

Selecting a specific country for providing a global platform requires analysis of foreign market for the US products where… It is very important in this context to take the right lead offered by the U.... .... Commercial Service through the Department of Commerce of the U.... .... Government. Philippines, as per the guidance of the U....
5 Pages (1250 words) Essay

International standards on customs services

They are necessary to ensure proper compliance with national and international laws.... This compliance is necessary to protect consumers from foreign-produced goods, and to ensure that proper… Admittedly, presently, there are a large number of international standards which are applicable to customs services....
5 Pages (1250 words) Essay

Analysis of Economic Articles

to Hit China With Solar-Panel tariffs” … The author states if chemical companies set their plants in the U.... The author answers the questions as to significant economic events described such articles Torello, Alessandro “Cheap U.... .... Gas Is Europe's Loss”, Washington, R....
5 Pages (1250 words) Essay

Pros and Cons of the UK Leaving the EU

The paper will explore all such pros and cons of UK leaving European Union as identified by economists and politicians.... Prior to 2012, Britain used to possess an ambivalent relationship with EU and both the parties endeavored to put diplomatic efforts for the… The scenario changed since 2013 when the British Prime Minister David Cameron put forward the plan of holding a referendum on continuation of their Such announcement made by British Prime Minister gave rise to multiple speculations regarding the probable effect of such referendum on UK and the world economy....
8 Pages (2000 words) Essay

The Globalization Policies in Different Countries

It is interesting to analyze the pros and cons of international trade.... The paper "The Globalization Policies in Different Countries" discusses that international trade has its merits as well as demerits.... If utilized judiciously, international trade can be a blessing to many countries, especially the economically poor countries....
6 Pages (1500 words) Coursework

International Trade as the Exchange of Goods and Services Across International Borders

The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture.... The author of the paper tells that international trade is in principle not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether the trade is across a border or not....
10 Pages (2500 words) Assignment

World Trade Organization: Challenges of Membership

First of all, developed countries agree upon reduction of their tariffs on industrial products by 40% till 2000.... This paper discusses the World Trade Organization: challenges of membership.... The paper analyses the main goal of the organization and functions.... Also, the paper considers the main challenge for WTO Members which is agricultural trade....
9 Pages (2250 words) Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us