Chapter 8 Analysis of a Tariff

Chapter Objective

To understand the effects of import tariffs on the imposing country and the world.

8.1 Introduction

Contents

Purposes for imposing a tariff

Types of Tariffs

Ways to measure tariff levels

Effects of a tariff on a small country

Effects of a tariff on a large country

8.2 The Evolvement of Tariffs

What is a tariff ?

The origin of tariffs: Tarifs

The Evolvement of Tariffs

8.3 Why would a Country Impose a Tariff?

Discourage consumption

Generate revenue

Reduce deficit in the balance of payment

Protect domestic industries

8.4 Types of Tariffs

Specific Tariffs 从量税 Ad Valorem Tariffs 从价税

Import Tariffs MFN rates Ordinary rates

Export Tariffs Transit Duties 过境税

Import Surtaxes

General Import Surtaxes Specific Import Surtaxes

Anti-dumping Duties 反倾销税 Countervailing Duties 反补贴税

Variable Levy 差价税

Common Agricultural Policy

共同农业政策

Target Price Threshold Price

Variable Levy = Threshold Price - CIF Price

Preferential duties

Lomé Convention 1975 洛美协定

ASEAN东盟

Generalized System of Preferences 普遍优惠制

History UNCTAD 联合国贸发会议

1964 Geneva 1968 New Delhi The Group of 77

Preferences and Coverage

Recipient Countries Products Covered Magnitude of Preference

GSP and China

8.5 Customs Tariff and Commodity Classification

Customs Tariff

海关税则 Tariff No. Description of Goods Rate of Duty

Commodity Classification

Customs Cooperation Council Nomenclature

（ CCCN ） 海关合作理事会税则商品目录 Standard International Trade Classification

国际贸易标准分类 （ SITIC ） Harmonized Commodity Description and Coding

System （ HS ） 商品列名与编码协调制度

第 76 章 铝及其制品

7601 未锻轧铝7601.1000 非合金铝7601.2000 铝合金7602 废铝碎料7602.0000 废铝碎料7603 铝粉及片状粉末7603.1000 非片状粉末7603.2000 片状粉末

8.6 Ways to Measure Tariff Level

simple average 简单平均 weighted average 加权平均

8.7 What Happens When a Small Country Imposes an Import Tariff?

Consumer Surplus 消费者剩余

O Y0 Y

PY

D

P0 Expenditure

Consumer Surplus

Producer Surplus 生产者剩余

O Y0 Y

PY

S

P0 Costs

Producer Surplus

O Y2 Y4 Y0 Y3 Y1 Y

PY

P1

P0

P1+t

H

Z F

E

V G SW+t

SWa b c d

Dd

Sd

Loss in Consumer Surplus: a + b + c + d

a : Redistribution Effect

c : Revenue Effect

b : Production Effect A deadweight loss from inefficient domestic production

d : Consumption Effect A deadweight loss from higher price and lower consumption volume

b+d : Total deadweight losses

8.8 What Happens When a Large Country Imposes an Import Tariff?

O Y1 Y3 Y2 Y0 Y

PY

P2P0

P1

Sd+W+t

a

b

cd

Dd

Sd

Sd+W

e

t

a , b, c, d The same as in the small country case.

e : terms-of-trade effect Tariff revenue from the exporting country

Net Welfare effect

If e>b+d, domestic welfare

If e<b+d, domestic welfare

In any case, world welfare

Nationally Optimal Tariff

Nationally Optimal Tariff

t*=1/Sm

Sm: Price elasticity of foreign

export supply curve

Nationally Optimal Tariff

Beggar-thy-neighbor policy

Tariff war

8.9 The Effective Rate of Protection

Under free trade

Domestic Value-added (V)

V0 = Pf – Pi

f : imported finished product

i : imported inputs

Under tariff protection

V1 = Pf (1+tf) – Pi (1+ti)

If V1 > V0 , Protection is effective.

ERP = --------- = ------------

a= Pi / Pf

V0 = Pf – Pi

V1 - V0

V0

tf – ati

1- a

ERP and Tariff Structure

Suppose Country A imports X,Pf =20, Pi =15, a=3/4,.

If tf=10% ,ti=0%; ERP=40%.

If tf=10% ,ti=10%; ERP=10%.

If tf=10% ,ti=20%; ERP=-20%.

ERP and Tariff Structure

If tf > ti , ERP> tf .

If tf = ti , ERP= tf = ti .

If tf < ti , ERP< tf .

Summary

Effects of import tariffs

Small country

Large country

Effective rate of protection