TARIFFS OR RESTRICTIONS TO TRADE
Definition: Tariffs are taxes or duties imposed on imports and exports by the government of a country. The idea behind tariffs is to restrict the volume of trade or improve the international terms of trade.
Reasons for imposition of tariffs or restriction of trades
The reasons countries impose tariffs or restrictions on international trade include the follow:
- To protect infant industries: Tariffs are imposed to protect infant industries from undue competition with foreign firms.
- Generation of revenue: Tariffs are also imposed to generate revenue for the country. Many countries derive their revenue from import and export duties.
- To prevent dumping: Tariffs are imposed to prevent dumping nf goods from foreign countries. This is to prevent foreign goods from being sold at prices lower than the home price.
- To improve balance of payments deficit: By imposing tariffs on imported goods, the unfavourable balance of payments can be corrected because importation will be discouraged.
- Retaliatory measures: This can be used in retaliation against countries which impose taxes on their imports.
- To prevent importation of dangerous goods: Dangerous or harmful goods
from other countries are prevented from being imported, through restriction.
- Employment generation: Countries imposed tariffs to encourage the establishment of local industries or
enhance the expansion and growth of existing ones so as to provide job opportunities.
- Political motive: Tariffs can be introduced as discriminatory measure against unfriendly countries.
- To promote self-sufficiency: Tariffs are also imposed on imported goods to enable a country to be self-sufficient in the production of numerous goods.
- To check consumption pattern: If all sorts of goods are allowed to come into the country, the citizens will develop uncontrolled appetite for foreign goods.
- To protect strategic industries: Tariff may be used in most cases to protect certain strategic industries.