On the Design of Tariff Policy : A Practical Guide to the Arguments For and Against Uniform Tariffs
This chapter examines the arguments for and against a uniform tariff structure. Arguments against uniformity are: terms of trade; ‘strategic,’ infant or restructuring industry considerations, revenue or balance of payments purposes, and tariffs as...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/562241486624901336/On-the-design-of-tariff-policy-a-practical-guide-to-the-arguments-for-and-against-uniform-tariffs http://hdl.handle.net/10986/26132 |
| Summary: | This chapter examines the arguments for
and against a uniform tariff structure. Arguments against
uniformity are: terms of trade; ‘strategic,’ infant or
restructuring industry considerations, revenue or balance of
payments purposes, and tariffs as a negotiating tool at the
WTO. Arguments in favor of uniformity are: political economy
considerations; administrative convenience; and reduction of
smuggling and corruption in customs. The author maintain
that tariff uniformity is the best choice in practice. A
uniform tariff conveys a number of advantages, the most
important of which is that if the tariff is uniform, the
gains to industry lobbying are much smaller (and may be
negative), creating a kind of free-rider problem for the
lobbying industry and dramatically reduces the incentive to
lobby for protection. Then: (1) the level of protection is
likely to be lower (the recent experience of Chile is a
dramatic case in point); (2) there is a direct saving of
resources from the reduced lobbying; (3) the reduction to
the gains from lobbying for protection provides a vastly
improved signal to valuable entrepreneurial talent which
will thus be encouraged to create better and cheaper
products; and (4) the reduction in resources devoted to
lobbying will result in less corruption in government, which
may have positive spillover effects into other dimensions of
government activity. |
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