Abstract
In examining some of the welfare effects of tariffs in Chapter 3, we emphasised throughout that our initial concern was with the welfare effects of nominal tariffs. Although we separated consumption effects from production effects, we clearly assumed that a given nominal tariff had the same effect on the prices faced by both consumers and producers. In practice this amounts to assuming that the production process is single-stage. It should be obvious, however, that this is rarely the case. In fact, most production processes are multistage. Thus we may well ask ourselves, what is the situation when a given producer is only the final link in the chain of production? In order to assemble a given product he has to purchase intermediate inputs, some of which may be imported. By definition, therefore, his value added is less than 100 per cent. Will a given nominal tariff have the same effect on prices faced by consumers and producers in these circumstances?
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