Import Protection Mechanism
There are many import protection mechanisms that are adopted by many countries as a domestic trade protection policy. They comprises of tariff, non-tariff, countervailing duties and anti-dumping. The main aim of protection mechanisms is to protect the local firms against interventions of local market by foreign firms. The mechanisms are termed to be ‘‘unfair’’ on the side of overseas firms as they try to favour the local firms, creating unfair competition at the market. Governments can implement these mechanisms in protection of their local goods (Hoekman 1995: 85).
This can be done through regulation of taxes (tariffs) and other trade regulations. Import Protection Mechanism According to Hoekman (1995: 86), protection laws by government may raise tariffs on imported goods or sometimes impose limits on the quantity of goods or services are permitted to enter into a country; quota. There are other interventions government can pursue like the restriction of the choice of consumer goods, which greatly leads to the cost of goods and the cost of running business.
The pursuits of the mechanisms may lower the purchasing power of consumers and fueling of unemployment in the country because of the shy off by foreigners if the conditions are severe. a) Tariffs These are taxes imposed on an imported good or service by a domestic government. The tariff rates are mostly diverse and vary depending on the type of the good and do not apply on locally manufactured goods. They are meant to protect the domestic firms from foreign competition as well as protecting the domestic manufacturers from dumping bi foreign firms or governments.
b) Non-tariffs These are barriers that limit the import level to a domestic market, for instance the anti-dumping measures and the countervailing duties. Examples comprises of import ban, quality conditions, labeling conditions, complex regulatory environment among others. The use of non-tariffs has become popular after the minimization of use of tariffs by the World Trade Organization. They are sometimes permitted when believed to safeguard health and safety of natural resources.
Critics believe that the measures are meant to evade free trade regulations like those pursued by WTO, EU and NAFTA who advocate for elimination of tariffs (Zhang, 1997). c) Countervailing duties These are duties that are imposed under the World Trade Organization regulations. The measures are undertaken when it’s evident that an overseas nation subsidizes their exports, a move that hurts domestic manufacturers of the importing nations. Countries are advised by the WTO to do their own investigation and see where to impose extra duties.
d) Anti-dumping Dumping occurs where the foreign firms charge very low prices of their products in a domestic market. Governments may be forced to impose anti-dumping measures to safeguard the domestic market. The anti-dumping actions may entail legal issues in an opinion thought to be unfair competition (Van den Bossche 1997: 42). Competition laws These are laws that regulate the market competition through anti-competitive conduct. They promote and maintain the effective operation of markets in both domestic and foreign set ups.
The pursuits of competition laws by countries around the world have helped boost trade and develop their economies. Conclusion The effects of tariffs are more visible than the losses. The cost of tariffs to the economies is not inconsequential; they have effect on global economy. The World Bank has estimated that if trade barriers were scrap off by nations, the world economy would grow by 830 billion dollars come 2015. The protection mechanisms help to eliminate cases of unfair competition, circumstance where may take an advantage of others at the market for instance by selling their goods at too low prices.
Van den Bossche, P. 2005. The Law and Policy of the World Trade Organisation. Cambridge: Cambridge University Press, p. 42. Zhang, A. & Zhang, Y. 1997. An analysis of import protection as export promotion under economies of scale. Issue 101 of Working paper series. University of California. Hoekman, B. M. , 1995. Trade Laws and Institutions: Good Practices and the World Trade Organisations. World Bank Publications, pp. 85-87