Uniform Tariff Research Articles

The Economics of Country-Specific Tariffs

A three country model of the world economy is used to show that when effective a country-specific tariff will have an impact on the world economy that is equivalent to the imposition of a uniform tariff plus a subsidy to the production of home importables in the favored country financed by a transfer from the home country. Lerner's symmetry theorem and the optimum tariff problem are discussed. Country-specific tariffs were a prominent feature of the Congressional debate surrounding the recent U.S. trade bill. A preliminary version of the bill which passed the House contained the well-known Gephardt Amendment that would have required increased tariffs or quotas on imports from countries running unacceptably large bilateral trade surpluses with the U.S. In addition, since 1976 the U.S. has allowed most goods produced in less-developed countries to enter duty-free under its version of the Generalized System of Preferences. The country-specific nature of these preferences runs contrary to all previous U.S. trade policy and sparked controversy in the U.S. Congress when the original legislation was passed in 1974 and again when it was extended in 1984. While country-specific tariffs are a relatively new feature of U.S. trade policy, they have an established history in other countries. Prior to joining the European Economic Community, Great Britain granted preferential tariff rates on imports from the Commonwealth countries. Moreover, these countries granted tariff preferences to less-developed countries nearly five years before the U.S. initiated its General System of Preferences program. A proper theoretical analysis of country-specific tariffs and preferential tariff reductions requires a multi-country model. However, most work on tariff policy uses the standard two country framework. Almost all of the multi-country models found in the literature consider only uniform tariffs or, as in the customs union literature, consider preferential tariffs as part of a multilateral effort to coordinate trade policies rather than as a unilateral policy instrument. An exception is the partial equilibrium analysis of McCulloch and Pinera (1977). They consider a three country world economy and examine the impact of a preferential tariff reduction

Coordination of OECD oil import policies: A gaming approach

In this paper, we assume that the world oil price is an increasing function of the level of world oil demand and that OECD nations adopt tariffs to reduce their oil imports. We present a simple model to investigate issues related to the coordination of tariff policies between two regions: US and other OECD nations. We compare the optimal tariff of each region for three cases: 1. (a) unilateral case, 2. (b) noncooperative case, 3. (c) cooperative case. Under the local linearity assumption, it is found that, for each region, the cooperative optimal tariff is greater than the noncooperative equilibrium tariff, which is, in turn, greater than the unilateral optimal tariff. Both the cooperative and the noncooperative optimal tariffs lead to greater net outputs for these two regions. In order to implement the cooperative optimal tariff, however, an agreement on a uniform tariff and on side payments may be needed. We conclude by discussing a numerical example.

The Tariff System and the Composition of Imports

1. It is generally believed that the tariff schedules of the developed countries are escalated-the rates on finished goods being higher than those on materials-and that this escalation tends to reduce the proportion of finished goods in the imports of those countries. To this general proposition, Corden (1966) has added the intuitively plausible qualification that when there is no potential production of raw materials in the advanced country, replacing the escalated (tariff) structure with the uniform tariff (leading to the same value of imports) would not raise the import of processed products (p. 229). 2. The purpose of this note is to demonstrate that, even in the case of no potential domestic production of raw materials, replacing the escalated tariff structure with the uniform tariff leading to the same total value of imports will cause imports of processed goods to increase, that is, that Corden's proposed qualification is not needed because the proposition is generally valid. 3. The demonstration is based on the first three assumptions set out in the introduction to Corden (1966), namely, (1) fixed physical inputoutput coefficients, (2) perfectly elastic import supply, and (3) traded goods remain traded after tariffs are imposed. Assumptions (2) and (3) ensure that the internal price of each importable is equal to the foreign supply price plus the tariff. To demonstrate, let total imports (imports of processed goods plus imports of inputs) be given by the expression

Benelux: The Formation of the Common Customs

A first and basic step in the formation of an economic union is the formation of a customs union in the sense of the imposition of a single uniform tariff of duties on imports into the partner countries from third countries and the removal of such duties on the flow of trade between the partner countries. It is the purpose of this article to give an account of some of the problems which arose when the Benelux countries, on January 1st, 1948, took this first step towards the formation of their economic union. This first step has proved to be the easiest task in the building of the full Benelux economic union. But even so some important problems arose. There were technical difficulties due to the fact that in a number of points the pre-existing Dutch and Belgium-Luxembourg tariff systems differed greatly from each other. In the first place, the classification of commodities for customs purposes was quite different in the pre-Benelux Dutch and BelgiumLuxembourg tariffs. The Dutch had a short list of products under 160 headings with 850 sub-headings, the order of the products on the list being simply alphabetical and without reference to the nature of the goods themselves. On the other hand, the Belgium-Luxembourg tariff was a much more elaborate and scientific structure starting off with 21 main divisions by type of product, sub-divided into 1,200 main headings and then into 3,600 sub-headings according to the nature of the products within the main divisions. Indeed, this systematic classification which had been introduced by a Belgian law of 8th May, 1924, had, together with the French tariff, served as a model on which the systematic League-of-Nations Draft Customs Nomenclature of 1937 had been based. The Benelux negotiators adopted in this respect the Belgian principle; and the common Benelux tariff was based, with minor modifications, upon the League-of-Nations classification. Secondly, only the relatively few products named on the Dutch list were subject to import duty. Everything which did not appear on

Electric Supply Tariffs in Great Britain

A SERIOUS hindrance to the rapid development of public electric supply in Great Britain is the great inequality in the charges made for electricity in many neighbouring districts. In a paper on public supply tariffs by J. A. Sumner read to the Institution of Electrical Engineers on February 28, it is concluded, after a careful study of methods of lowering the costs of distribution, that it is not unreasonable to forecast that electricity will be available within the next few years to all consumers at a rate of 0·5d. per unit. Mr. Sumner begins by comparing the costs per kilowatt of a private supply station with that of a public supply. Statistics for the case when Diesel engines are used for the private supply prove that it is the more expensive. It appears that many undertakings are selling electricity for power purposes at a lower rate than is required to compete with the real costs of running private plant. Hence in some cases the domestic consumer is penalised unfairly. It is pointed out that the distinction between ‘urban’ and ‘rural’ supply is sometimes unnecessary, as in many cases the capital expenditure for dwellings near the mains is much the same in the two cases. The analysis of the statistics proves that the merging of electricity areas into much larger single districts than at present is necessary for the reasonable standardisation of tariffs. It is possible in this way to balance the inevitable deficit of a newly-developed area against the surplus from the older areas. By this means a uniform tariff can be kept throughout each single large administrative district.