Question

How does a cascading tariff structure work? How does it promote import substitution and " shallow industrialization"? What are the consequences of "shallow industrialization"?

Answer 1

The cascading tariff structure considers all the importers or exporters of certain products; the system ensures that imposed sales tax is pretty charged to all salespersons. The buyers or sellers incur the charges at successive stages in the supply chain, from the initial stages of raw material collection to consumers of finished products (Khoja et al., 2020). The consumers or buyers incur a price based on its cost, incorporating previous tax on the product. Import substitution involves limiting the importation of manufactured goods to alleviate demand for domestically produced commodities; this is evidenced in industrialized nations like India, the United States, and China. Limiting governments introduce import quotas, subsidized loans to local infant industries, protective tariffs, and preferential licensing on imports.

 Shallow industrialization has several positive and negative consequences; first, it increases wealth accumulation by individuals engaged in trade. Traders involved at various levels, whether the suppliers, intermediaries, or hawkers of some manufactured products, all benefit financially by making profits that facilitate meeting their daily needs (Henderson et al.,93). The production of commodities locally by already established or infant industries help meet consumers' needs; this helps meet the demand and supply principle. The availability of goods and services needed and the making of profits alleviates the standards of living.

 

 

The cascading tariff structure considers all the importers or exporters of certain products; the system ensures that imposed sales tax is pretty charged to all salespersons.