TARIFF'S ON FOREIGN PRODUCTS

Tariff's on foreign products

Tariffs on Foreign Products

Protectionism is the economic policy of protecting the industries and agriculture of a state against foreign competition through government intervention. It occurs when one country erects barriers to trade with other countries. These barriers can take many forms such as: tariffs, quotas or other technical rules. Governments often use more than one of these barriers to protect local industries against unfair foreign competition. These barriers may also be in reaction to dumping, the practice of selling goods abroad at less than their true cost--a practice indulged in by firms seeking to gain market share or by state-subsidized firms that can afford to absorb the loss. Tariff is a tax generally imposed by a government on imports and, in some instances, on exports. Originally, it was levied to raise revenue. After the growth of industry and the formation of national economies, tariffs were imposed chiefly as instruments of national economic policy. Tariffs is imposed to protect domestic industries against foreign competition and to achieve a favorable balance of trade. These practices also led to the levying of high and often discriminatory tariff by one government as an expression of hostility to another government. In recent years, the use of tariff in the world economy has declined and the use of other a variety of other restrictions has increased. Average tariff level have fallen in most of the countries, largely as a result of international negotiation conducted under General Agreement on Tariffs and Trade (GATT), and now known as World Trade Organization (WTO), a forum for international discussion of trade issues. Most of the countries also favor free trade and denying protectionism. The government, by using, several trade barriers such as tariff , quotas, tries to protect the domestic industry from foreign competition as well as to gain revenue. But in doing so it indirectly harms its own domestic industry and economy. Tariff barrier, instead of providing incentive for the domestic industries, distorts the market. It encourages the growth of inefficient industries, as they do not have to worry much from foreign competition. Tariff reduces the volume of import as well as export. Because of tariff barrier, some of the gains from trade are lost. The government and the producer gain in this process, but they gain at the expense of consumers. Government by placing tariff barrier on goods, increases in the price of ...