Import tariffs, quality investment and welfare

In this paper we study incentives for a government to impose a discriminatory or uniform import tariff on its low and high quality imports. In comparison to free trade both tariffs decrease total welfare. In response to any tariff, firms decrease quality investment and total output sold declines. The degree of product differentiation under both the tariffs increases. Consumer surplus declines by a greater amount than the increase in revenues under an import tariff. While the uniform tariff works to the advantage of the high quality firm, the discriminative tariff works to the advantage of the low quality firm. Total welfare, though lower than under free trade, is greater under a uniform than under a discriminatory tariff

Optimal tariff period determination

We separated the problem into two simpler problems. The first problem is to choose the seasonal tariff periods, and the second problem is to choose the daily tariff periods. During the study group, we mainly considered the first problem, which is simpler because there are just two seasonal tariff periods, peak and off-peak. In the second problem, we can have a maximum of four daily tariff periods

Tariff reform: an imperial strategy, 1903-1913

Historians of the Edwardian tariff reform movement have disagreed about its aims. This article examines the motivations of the leadership of the Tariff Reform League, which was by far the most influential organization in the tariff lobby. It argues that the League's leaders were more empire-minded than often allowed, and that it was the preferential tariff which they were most determined to promulgate and defend. Indeed, attempts by the Balfourite wing of the Unionist party to twist tariff reform away from its imperial origins were strongly resisted by the League, and the forces of protection within the organization were also carefully controlled. When the Tariff Reform League finally gave way on the issue of imperial preference in January 1913, it was not because it had suddenly ceased to be concerned about the unity of the empire. Rather, the widespread public hostility to the imposition of food duties showed no sign of diminishing, thus making it difficult to persuade a critical mass within the Unionist party that tariff reform was a politically viable strategy of imperial federation

A Simple Model of Trade with Heterogeneous Firms and Trade Policy

This paper builds a Ricardian-Chamberlinian two-country model with heterogeneous firms in a monopolistically competitive sector in which every new entrant faces increasing fixed costs of production. There are efficiency gaps between countries in marginal and fixed costs and a country unilaterally imposes an import tariff. It is shown that an increase in tariff increases the number of firms of the tariff imposing country while decreases the number of firms of the tariff-imposed country, possibly reverting the position of net exporter of varieties. A tariff is detrimental to the tariff-imposed country. A small tariff may be beneficial to the tariff-imposing country.

"A Theory of Optimal Tariffs under a Revenue Constraint"

This paper examines the optimal tariff structure under a revenue constraint. When a fixed level of tax revenue has to be collected from the tariff alone, no adjustment in tariff rates can achieve an efficient resource allocation, even in a small open economy. Hence, the optimal tariff problem arises under a revenue constraint. We show that the revenue-constrained optimal tariff structure is characterized by the following two rules: (i) the optimal tariff rate is lower for the import good that is a closer substitute for the export good; and (ii) the stronger the cross-substitutability between imports, the closer the optimal tariff is to uniformity. This theoretically explains why empirical studies have shown that the efficiency loss from a uniform tariff structure is negligible.

Partial Privatization, Foreign Competition, and Tariffs Ranking

This paper compares the optimal tariff and revenue maximizing tariffs in the presence of partial privatization. We show that in an international mixed oligopoly with asymmetric costs and partial privatization, when the marginal cost of the privatized firm exceeds a critical value, maximum -revenue tariff is higher than optimum-welfare tariff. Otherwise, optimum-welfare tariff is higher than maximum-revenue tariff. In addition, associating with the market-opening policy, the domestic government should accelerate privatization path and impose a lower welfare-optimum tariff rate.mixed oligopoly, partial privatization, tariff ranking

The tariff equivalent of tariff-rate quotas - A case study applied to the import of an agricultural product in Romania

The paper presents one methodology of calculating the tariff equivalent of the tariff-rate quota as a particular case of a non-tariff barrier for an agricultural product imported in Romania based on recommendations in international literature. The tariff equivalent of tariff-rate quota of imports from the EU is approximately 35%, lower than the tariff outside the quota. Nonetheless this is considerable higher when compared with the Common External Tariff (CET). Elimination of the nominal protection level as consequence of the adoption the CET is expected to stimulate imports pressure especially from price competitive import partners both from EU (such as Slovakia, Belgium, Austria, Czech Republic and Italy) and non EU countries (Serbia, Bosnia and Herzegovina, Macedonia and Croatia). A basic model forecasts that, with the lowered protection, annual imports will rise with at least 13.5 thousand tonnes, thus an increase of 23% compared with the average annual imports during 1990-2005.non-tariff barriers, tariff-rate quotas, tariff equivalent

Tariff rates, tariff revenue, and tariff reform : some new facts

The ad valorem tariff rateson specific products and the ratio of tariff revenue to import value, the collected rate, are only tenuously related, contend the authors. Using tariff and revenue data (at the tariff code line level of detail) for three developing countries, the authors compare the statutory ad valorem tariff rates (official rates) with the ratio of tariff revenues to import values (collected rates). They document four facts: (1) the collected rate for any given item of the tariff code has almost no relationship to the official rate for that item; (2) the variation of collected rates around the official rate increases as the level of the official rate increases; (3) the collected rates increase much less, on average, than one-for-one with the official rates; and (4) above a certain level, collected rates do not increase at all despite increases in official rates. Collection rates appear to level off at roughly 50 percent. (In Kenya, collected rates are lower for high-tariff than for moderate-tariff items. Assigning lower rates for the high-tariff items would actually increase revenue on those items.) The implications of these findings are twofold for calculating general revenue. The rates are not the critical determinant of revenues. The revenue implications of large rate changes can be offset by modest changes in the system of exemptions, for example. The benefit of eliminating exemptions is primarily transparency. The costs of programs that provide import exemptions for, say, regional promotion, are often hidden in customs statistics. Secondly, if pressures that cause collected rates not to increase one-for-one with tariff rates will continue to be present in any tariff regime, then these must be factored into tariff reform design.TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Export Competitiveness,Environmental Economics&Policies,Trade and Regional Integration,Economic Theory&Research

Bilateral tariff rates in international trade : finished goods versus intermediate goods

In this paper, we examined back-and-forth international transactions through tariff reduction by estimating modified gravity equations for finished goods and intermediate goods separately. Our main findings are as follows. Exports of finished machinery products are negatively associated with not only the importer's tariff rates on finished machinery products but also the exporter's tariff rates on machinery parts. Similarly, exports of machinery parts are negatively associated with not only the importer's tariff rates on machinery parts but also the exporter's tariff rates on finished machinery products. These results imply that tariff reduction in only one production process in an industry has the potential to drastically change the magnitude of trade in the whole industry.International trade, Tariff, Gravity, Finished Goods Trade, Intermediate Goods Trade

Relative efficiency of specific and ad-valorem tariffs in a model of monopolistic competition

The relative efficiency of ad-valorem and specific tariffs is still an active debate in the international trade literature. Contrary to the general belief about the ad-valorem tariff being superior under various imperfectly competitive market settings, it is shown that the specific tariff generates more welfare under monopolistic competition. We argue that this result is not general. If we follow the empirical evidence that firms use variable mark-ups and use a utility function that allows for it, we find that the ad-valorem tariff is more efficient when consumers’ love for variety is low. The relative efficiency overturns to the specific tariff as consumers’ love for variety increases