Economic Policy ***Tariffs***

Definition fee collected when goods or services cross the countrys borders countrys geographical border may be different from its customs border one of the oldest and most commonly used tools of trade policy.

Types of tariff import; COUNTRY TARIFF COUNTRY TARIFF export; COUNTRY TARIFF transit;

Types of tariff [cont.] ad valorem; as a percentage of the value of the goods How to define this value? ad spetiem (specific); fixed amount for a certain quantity of the goods, e.g. 10 EUR per 1 tone compound; e.g. a percentage of the value but not less than a fixed amount for a certain quantity

Tariff classification classification of goods and relevant tariffs one-column tariffs goodsgoods multiple-column tariffs goodsgoods tariff preferences

Effects of tariffs redistribution – change of a consumer surplus (CS); a producer surplus (PS); a government surplus (GS) fiscal – income to the state budget protection – domestic producers against foreign competitors consumption – consumers have to pay more => buy less

Mechanism of tariffs Autarky = no foreign trade Demand Price Quantity Supply P (H) Q CS PS P (W) Q1Q2 Import CS PS Free Trade Price Quantity Supply P (H) Q Demand

Mechanism of tariffs P (W) Q1Q2 CS PS Protectionism Cena Quantity Supply P (H) Q Demand Free trade Import P (W) Q1Q2 CS PS Price Quantity Supply P (H) Q Demand P (W) + T Q3Q4 Import GS