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The effective rate of protection is a weighted average of nominal tariffs and tariffs on imported in

Chako

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8 years ago

The effective rate of protection is a weighted average of nominal tariffs and tariffs on imported in

The effective rate of protection is a weighted average of nominal tariffs and tariffs on imported inputs. It has been noted that in most industrialized countries, the nominal tariffs on raw materials or intermediate components or products are lower than on final-stage products meant for final markets. Why would countries design their tariff structures in this manner? Who tends to be helped, and who is harmed by this cascading tariff structure?

Textbook

International Economics: Theory and Policy

Edition: 10^th

Author: Krugman

Read 178 times

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machukian

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8 years ago

The cascading tariff structure is probably the result of systematic lobbying on the part of manufacturing interests and lobbies to lower costs of production (in terms of imported inputs). The end result is in fact to create effective rates of protection for downstream, or final manufacturing processes that are often much higher than nominal tariffs on these products. An important group, which is hurt by this are exporters of raw materials and components in developing countries.

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Chako Author

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8 years ago

Good answer, thank you

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machukian

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