Chapter 8 Analysis of a Tariff

8.1 Introduction Chapter Objective To understand the effects of import tariffs on the imposing country and the world.

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 Export Tariffs Transit Duties 过境税 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 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 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 PY Consumer Surplus P0 Expenditure D O Y0 Y

Producer Surplus 生产者剩余 PY Producer Surplus S P0 Costs O Y0 Y

PY Sd H E P0 V G P1+t SW+t a b c d P1 SW Z F Dd O Y2 Y4 Y0 Y3 Y1 Y

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?

PY Sd Sd+W+t b t Sd+W d P1 a c P0 P2 e Dd O Y1 Y3 Y2 Y0 Y

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 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

V0 = Pf – Pi Under tariff protection V1 = Pf (1+tf) – Pi (1+ti) If V1 > V0 , Protection is effective. ERP = --------- = ------------ a= Pi / Pf V1 - V0 tf – ati V0 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