A tariff (from the Arabic Arabic (العربية al-ʿarabīyah, ( Arabic pronunciation ) or عربي ʿarabī) is a Central Semitic language, thus related to and classified alongside other Semitic languages such as Hebrew and the Neo-Aramaic languages. Arabic has more speakers than any other language in the Semitic language family. It is spoken by more than 280 million تعريفة, transliterated Different approaches and methods for the romanization of Arabic exist. They vary in the way that they address the inherent problems of rendering written and spoken Arabic in the Latin alphabet; they also use different symbols for Arabic phonemes that do not exist in English or other European languages. (Note that in some internet browsers, some taʿrīfah, "notification"; derived from the verb In syntax, a verb, from the Latin verbum meaning word, is a word that conveys action (bring, read, walk, run, learn), or a state of being (exist, stand). In most languages, verbs are inflected (modified in form) to encode tense, aspect, mood and voice. A verb may also agree with the person, gender, and/or number of some of its arguments, such as ʿarrafa, "to announce, inform") is a tax To tax is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law levied on imports The term "import" is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus an import is any or exports The term "export" is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer". In International Trade, &.

History

Tariffs are usually associated with protectionism Protectionism is the economic policy of restraining trade between states, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to discourage imports, and prevent foreign take-over of domestic markets and companies. This policy is closely aligned with anti-globalization, and, the economic policy of restraining trade between nations. For political reasons, tariffs are usually imposed on imported goods, although they may also be imposed on exported goods.

In the past, tariffs formed a much larger part of government revenue than they do today.

When shipments of goods arrive at a border crossing or port, customs officers inspect the contents and charge a tax according to the tariff formula. Since the goods cannot continue on their way until the duty is paid, it is the easiest duty to collect, and the cost of collection is small. Traders seeking to evade tariffs are known as smugglers Smuggling is the clandestine transportation of goods or persons past a point where prohibited, such as out of a building, into a prison, or across an international border, in violation of applicable laws or other regulations.

Types

There are various types of tariffs:

• An ad valorem An ad valorem tax is a tax based on the value of real estate or personal property. It is more common than a specific duty, a tax based on the quantity of an item, such as cents per kilogram, regardless of price tariff is a set percentage of the value of the good that is being imported. Sometimes these are problematic, as when the international price of a good falls, so does the tariff, and domestic industries become more vulnerable to competition. Conversely, when the price of a good rises on the international market so does the tariff, but a country is often less interested in protection when the price is high.

They also face the problem of inappropriate transfer pricing Transfer pricing refers to the setting, analysis, documentation, and adjustment of charges made between related parties for good, services, or use of property . Transfer prices among components of an enterprise may be used to reflect allocation of resources among such components, or for other purposes. OECD Transfer Pricing Guidelines state, “ where a company declares a value for goods being traded which differs from the market price, aimed at reducing overall taxes due.

• A SPECIFIC tariff, is a tariff of a specific amount of money that does not vary with the price of the good. These tariffs are vulnerable to changes in the market or inflation unless updated periodically.
• A REVENUE tariff is a set of rates designed primarily to raise money for the government. A tariff on coffee imports imposed by countries where coffee cannot be grown, for example raises a steady flow of revenue.
• A PROHIBITIVE tariff is one so high that nearly no one imports any of that item.
• A PROTECTIVE tariff is intended to artificially inflate prices of imports and protect domestic industries from foreign competition (see also effective rate of protection In economics, the effective rate of protection is a measure of the total effect of the entire tariff structure on the value added per unit of output in each industry, when both intermediate and final goods are imported. This statistic is used by economists to measure the real amount of protection afforded to a particular industry by import duties,,) especially from competitors whose host nations allow them to operate under conditions that are illegal in the protected nation, or who subsidize their exports.
• An environmental tariff An Environmental tariff, also known as a green tariff or eco-tariff, is an import or export tax placed on products being imported from, or also being sent to countries with substandard environmental pollution controls. They can be used as controls on global pollution and can also be considered as corrective measures against "environmental, similar to a 'protective' tariff, is also known as a 'green' tariff or 'eco-tariff', and is placed on products being imported from, and also being sent to countries with substandard environmental pollution controls.
• A RETALIATORY tariff is one placed against a country who already charges tariffs against the country charging the retaliatory tariff (e.g. If the United States were to charge tariffs on Chinese goods, China would probably charge a tariff on American goods, also). These are usually used in an attempt to get other tariffs rescinded.

Tariffs, in the 20th century, are set by a Tariff Commission based on terms of reference Terms of reference, abbreviated as TOR, describe the purpose and structure of a project, committee, meeting, negotiation, etc. When used with regard to a project, they can also be known as a project charter obtained from the government or local authority and suo motu Suo motu, meaning "on its own motion," is a Latin legal term, approximately equivalent to the English term sua sponte. It is used, for example, where a government agency acts on its own cognizance, as in "the Commission took suo motu control over the matter." Example - "there is no requirement that a court suo motu studies of industry structure.

Tax, tariff and trade The tax, tariff and trade laws of a political region, state or trade bloc determine which form of consumption and production tend to be encouraged or discouraged. All three are often changed by a trade pact rules in modern times are usually set together because of their common impact on industrial policy The Industrial Policy plan of a nation, sometimes shortened IP, "denotes a nation's declared, official, total strategic effort to influence sectoral development and, thus, national industry portfolio." A nation's Industrial Policy plan is composed of a comprehensive set of sector-specific industrial policies, investment policy As globalization integrates the economies of neighboring and of trading states, they are typically forced to trade off such rules as part of a common tax, tariff and trade regime, e.g. as defined by a free trade pact. Investment policy favoring local investors over global ones is typically discouraged in such pacts, and the idea of a separate, and agricultural policy Agricultural policy describes a set of laws relating to domestic agriculture and imports of foreign agricultural products. Governments usually implement agricultural policies with the goal of achieving a specific outcome in the domestic agricultural product markets. Outcomes can involve, for example, a guaranteed supply level, price stability,. A trade bloc A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where regional barriers to trade are reduced or eliminated among the participating states is a group of allied countries agreeing to minimize or eliminate tariffs and other barriers against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc. A customs union A customs union is a type of trade bloc which is composed of a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas. Common competition policy is also helpful to avoid competition deficiency has a common external tariff, and, according to an agreed formula, the participating countries share the revenues from tariffs on goods entering the customs union.

If a country's major industries lose to foreign competition, the loss of jobs and tax revenue can severely impair parts of that country's economy and increase poverty Poverty is the lack of basic human needs, such as clean water, nutrition, health care, education, clothing and shelter, because of the inability to afford them. This is also referred to as absolute poverty or destitution. Relative poverty is the condition of having fewer resources or less income than others within a society or country, or compared. If a nation's standard of living Standard of living is generally measured by standards such as real income per person and poverty rate. Other measures such as access and quality of health care, income growth inequality and educational standards are also used. Examples are access to certain goods (such as number of refrigerators per 1000 people), or measures of health such as life or industrial regulations are too great, it is impossible for domestic industries to survive unprotected trade with inferior nations without compromising them; this compromise consists of a global race to the bottom A race to the bottom usually refers to an individual seeking a more favourable outcome at the expense of others by upsetting an equilibrium to their own favour, only to cause retaliation by the other individuals, resulting in all participants having an overall less favourable outcome. For example, some people may buy larger cars for safety in a. Protective tariffs have historically been used as a measure against this possibility. However, protective tariffs have disadvantages as well. The most notable is that they prevent the price of the good subject to the tariff from undercutting local competition, disadvantaging consumers of that good or manufacturers who use that good to produce something else: for example a tariff on food can increase poverty Poverty is the lack of basic human needs, such as clean water, nutrition, health care, education, clothing and shelter, because of the inability to afford them. This is also referred to as absolute poverty or destitution. Relative poverty is the condition of having fewer resources or less income than others within a society or country, or compared, while a tariff on steel can make automobile manufacture less competitive. They can also backfire if countries whose trade is disadvantaged by the tariff impose tariffs of their own, resulting in a trade war A trade war refers to two or more nations raising or creating tariffs or other trade barriers on each other in retaliation for other trade barriers. Increased protection causes both nations' output compositions to move towards their autarky position and, according to free trade theorists, disadvantaging both sides.(Murad)

Economic analysis

Neoclassical economic Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often as mediated through a hypothesized maximization of income-constrained utility by individuals and of cost-constrained profits of firms employing available theories hold that tariffs are a harmful interference with the individual freedom and the laws of the free market A free market is a market without economic intervention and regulation by government except to enforce ownership and contracts. It is the opposite of a controlled market, where the government regulates how goods, services and labor are used, priced, or distributed. Advocates of a free market traditionally consider the term to imply that the means. They believe that it is unfair toward consumers and generally disadvantageous for a country to artificially maintain an industry made inefficient by local demands, and that it is better to allow a collapse to take place. Opposition to all tariffs is part of the free trade Free trade is a system of trade policy that allows traders to act and or transact without interference from government. According to the law of comparative advantage the policy permits trading partners mutual gains from trade of goods and services principle; the World Trade Organization The World Trade Organization is an international organization designed by its founders to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1947 aims to reduce tariffs and to avoid countries discriminating between differing countries when applying tariffs.

In the following graph we see the effect that an import tariff has on the domestic economy. In a closed economy without trade we would see equilibrium In economics, economic equilibrium is simply a state of the world where economic forces are balanced and in the absence of external influences the values of economic variables will not change. It is the point at which quantity demanded and quantity supplied are equal. Market equilibrium, for example, refers to a condition where a market price is at the intersection of the demand and supply curves (point B), yielding prices of $70 and an output of Y*. In this case the consumer surplus The term surplus is used in economics for several related quantities. The consumer surplus is the amount that consumers benefit by being able to purchase a product for a price that is less than the most that they would be willing to pay. The producer surplus is the amount that producers benefit by selling at a market price mechanism that is higher would be equal to the area inside points A, B and K, while producer surplus The term surplus is used in economics for several related quantities. The consumer surplus is the amount that consumers benefit by being able to purchase a product for a price that is less than the most that they would be willing to pay. The producer surplus is the amount that producers benefit by selling at a market price mechanism that is higher is given as the area A, B and L. When incorporating free international trade into the model we introduce a new supply curve denoted as S_W. This curve makes the assumption that the international supply of the good or service is perfectly elastic In economics, elasticity is the ratio of the percent change in one variable to the percent change in another variable. It is a tool for measuring the responsiveness of a function to changes in parameters in a unit-less way. Frequently used elasticities include price elasticity of demand, price elasticity of supply, income elasticity of demand, and that the world can produce at a near infinite quantity at the given price. Obviously, in real world conditions this is somewhat unrealistic, but making such assumptions is unlikely to have a material impact on the outcome of the model. In this case the international price of the good is $50 ($20 less than the domestic equilibrium price).

The model above is only completely accurate in the extreme case where none of the consumers belong to the producers group and the cost of the product is a fraction of their wages. If instead, we take the opposite extreme, and assume all consumers come from the producers' group, and also assume their only purchasing power comes from the wages earned in production and the product costs their whole wage, then the graph looks radically different. Without tariffs, only those producers/consumers able to produce the product at the world price will have the money to purchase it at that price. The small FGL triangle will be matched by an equally small mirror image triangle of consumers still able to buy. With tariffs, a larger CDL triangle and its mirror will survive.

Note also, that with or without tariffs, there is no incentive to buy the imported goods over the domestic, as the price of each is the same. Only by altering available purchasing power through debt, selling off assets, or new wages from new forms of domestic production, will the imported goods be purchased. Or, of course, if its price were only a fraction of wages.

In the real world, as more imports replace domestic goods, they consume a larger fraction of available domestic wages, moving the graph towards this view of the model. If new forms of production are not found in time, the nation will go bankrupt, and internal political pressures will lead to debt default, extreme tariffs, or worse.

Establishing tariffs slows down this process, allowing more time for new forms of production to be developed, but also buttresses industries which may never regain competitive prices.

Political analysis

The tariff has been used as a political tool to establish an independent nation; for example, the United States Tariff Act of 1789 The Hamilton Tariff was the second statute ever enacted by the new federal government of the United States. Most of the rates of the tariff were between 5 and 10 percent, depending on the value of the item, signed specifically on July 4, was called the "Second Declaration of Independence" by newspapers because it was intended to be the economic means to achieve the political goal of a sovereign and independent United States.^[1]

In modern times, the political impact of tariffs has been seen in a positive and negative sense. The 2002 United States steel tariff The Section 201 steel tariff is a political issue in the United States regarding a tariff that President George W. Bush placed on imported steel on March 5, 2002 . The tariffs were lifted by Bush on December 4, 2003 imposed a 30% tariff on a variety of imported steel products for a period of three years. American steel producers supported the tariff^[2], but the move was criticised by the Cato Institute The Cato Institute is a libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Edward H. Crane, who remains president and CEO, and Charles Koch, chairman of the board and chief executive officer of the oil conglomerate Koch Industries, Inc., the second largest privately held company by revenue in the United States,^[3].

Tariffs can occasionally emerge as a political issue prior to an election An election is a formal decision-making process by which a population chooses an individual to hold public office. Elections have been the usual mechanism by which modern representative democracy operates since the 17th century. Elections may fill offices in the legislature, sometimes in the executive and judiciary, and for regional and local. In the leadup to the 2007 Australian Federal election Federal elections for the Parliament of Australia were held on Saturday 24 November 2007 after a 6-week campaign, in which 13.6 million Australians were enrolled to vote. All 150 seats in the House of Representatives and 40 of the seats in the 76-member Senate were contested in the election, the Australian Labor Party Known as Labor, or the ALP for short, the party is the current governing party of Australia, since the 2007 federal election. Kevin Rudd is the party's federal parliamentary leader and Prime Minister of Australia. Labor currently governs in all states and territories except for Western Australia announced it would undertake a review of Australian car tariffs if elected^[4]. The Liberal Party Founded a year after the 1943 federal election to replace the United Australia Party, the centre-right Liberal Party typically competes with the centre-left Australian Labor Party for political office. When in government it traditionally governs in a coalition with the National Party made a similar commitment, while independent candidate Nick Xenophon Nicholas "Nick" Xenophon is a South Australian barrister, anti-gambling campaigner and politician. He attended Prince Alfred College, and studied law at the University of Adelaide, attaining his Bachelor of Laws in 1981. Xenophon established and became principal of his own law firm, Xenophon & Co. in 1984. Between 1994 and 1997 he announced his intention to introduce tariff-based legislation as "a matter of urgency".^[5]

United States

See also

• Effective rate of protection In economics, the effective rate of protection is a measure of the total effect of the entire tariff structure on the value added per unit of output in each industry, when both intermediate and final goods are imported. This statistic is used by economists to measure the real amount of protection afforded to a particular industry by import duties,
• Embargo An embargo is the partial or complete prohibition of the movement of merchant ships into or out of a country's ports, in order to isolate it. Embargoes are considered strong diplomatic measures imposed in an effort, by the embargo-imposing-country, to elicit a given national-interest result from the country on which it is imposed. Embargoes are
• Environmental tariff An Environmental tariff, also known as a green tariff or eco-tariff, is an import or export tax placed on products being imported from, or also being sent to countries with substandard environmental pollution controls. They can be used as controls on global pollution and can also be considered as corrective measures against "environmental
• Excise duty An excise or excise tax is a type of tax charged on goods produced within the country (as opposed to customs duties, charged on goods from outside the country). It is a tax on the production or sale of a good
• General Agreement on Tariffs and Trade The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was formed in 1947 and lasted until 1994, when it was replaced by the World Trade Organization in 1995. The original GATT (GATT)
• Import quota An import quota is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. Quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy
• List of international trade topics
• List of tariffs Categories: Economic history | International economics | International trade
• Swiss Formula The Swiss Formula is a mathematical formula designed to cut and harmonize tariff rates in international trade. Several countries are pushing for its use in World Trade Organization trade negotiations. It was first introduced by the Swiss Delegation to the WTO during the current round of trade negotiations at the WTO, the Doha Development Round or
• Telecommunications tariff
• Trade barrier Trade barriers are a general term that describes any government policy or regulation that restricts international trade. The barriers can take many forms, including the following terms that include many restrictions in international trade within multiple countries that import and export any items of trade:

References

1. ^ Thomas Jefferson - under George Washington by America's History
2. ^ BW Online | March 8, 2002 | Behind the Steel-Tariff Curtain
3. ^ Trade Briefing Paper no. 14. Steel Trap: How Subsidies and Protectionism Weaken the U.S. Steel Industry | Cato's Center for Trade Policy Studies
4. ^ http://www.theaustralian.news.com.au/story/0,25197,22729573-5013871,00.html
5. ^ Candidate wants car tariff cuts halted - Breaking News - National - Breaking News

Further reading

• Salvatore, Dominick (2005), Introduction to International Economics (First ed.), Hoboken, NJ: Wiley, ISBN 0471202266 .
• Taussig, F. W. (1911), "Tariff", Encyclopedia Britannica, 26 (11th ed.), pp. 422–427, http://www.econlib.org/library/Taussig/tsgEnc1.html .
• Free Markets And Tariffs, http://www.americanprotectionist.com/Archives/FreeMarkets.html .

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