Running head: Global Financing and Exchange Rate Mechanisms
Global Financing and Exchange Rate Mechanisms
Global Financing and Exchange Rate Mechanisms
Who really benefits from tariffs? "A tariff is a tax on foreign goods upon importation." (Wikipeidia, 2007) When a ship arrives in port a customs officer inspects the contents and charges a tax according to a tariff formula. Since the goods cannot be unloaded until the tax is paid, it is the easiest tax to collect. Though this is the easiest tax to collect, who benefits from the tax. This essay will discuss tariff and non-tariff barriers, how they are used in global financing operations, and the importance of managing risks associated with tariff barriers.
Tariff and Non-tariff Barriers
Tariffs are taxes on imports or goods into a country or region. This is one of the oldest forms of government involvement in trading activities. Tariffs are implemented for two clear economic purposes. They provide revenue for the government and they improve economic returns for firms and suppliers of domestic industries that face competition from foreign imports. This protection comes at an economic cost to consumers who pay higher prices for imported goods and to the economy as a whole through the unproductive allocation of resources to the import competing domestic industry. Therefore, "since 1948, when average tariffs on manufactured goods exceeded 30 percent in most developed economies, those economies have sought to reduce tariffs on manufactured goods through several rounds of negotiations under the General Agreement on Tariffs Trade (GATT)." (Carbaugh, 2000) When coupled with other barriers to trade they have often constituted formidable barriers to market access fr ...