Tariff • Usually levied as a percentage of the declared value of the good, similar to a sales tax • Unlike sales tax, tariff rates are often different for every good and tariffs do not apply to domestically produced goods. What is it? (The 3 R’s)
Article On Tariffs • World Bank estimates that if all barriers to trade such as tariffs were eliminated, the global economy would expand by 830 billion dollars by 2015. • Tariffs hurt the country imposing them and the country imposed on. • 2000 President Bush raised tariffs on imported steel goods. • If tariffs are bad for the economy, why do we have them?
Definitions Needing to Know • Harmonized Tariff System- Importers and exporters have to determine the correct classification number for a given product that will cross borders • Effect on imports and exports: People who work with this must familiarize themselves with the different classifications and use them accurately • Product classification example
Definitions Needing to Know • Nontariff trade barrier: any measure other than a tariff that is a deterrent of obstacle to the sale of products in a foreign market. • Quota: government-imposed limit or restriction on the number of units that can be imported. • The U.S. has over 8,000 different tariff classifications. • United States engages in “managed” trade. • Ukraine wool coat example.
Definitions Needing to Know • Restrictive administrative and technical regulations: Take form of antidumping regulations, size regulations, and safety and health regulations Effects: Volkswagon.
Tariff Systems • Provide either a single rate of duty for each item applicable to all countries or two or more rates, applicable to different countries or groups of countries. • Single column tariff: a schedule of duties in which the rate applies to imports from all countries on the same basis. • Two-column tariff: General duties plus special duties indicating reduced rates determined by negotiations.
Tariff Systems • Normal Trade Relations: Agreed upon by convention. Nations agree to apply their most favorable tariff or lowest tariff rate to all nations. U.S. and NTR Does not give NTR to North Korea, Iran, Cuba, and Libya.