Question

C. “If the nominal tariff is 40% on imported textile and 15 % on important leather products, this implies that domestic textile industries are more protected”. Do you agree/ disagree with this statement? Why? Explain in detail.

Answer 1

No . I disagree with the statement. If nominal tariff is 40% on imported textile and 15 % on important leather products , this implies that domestic textile industries are not protected. If a nation imposes a lower tariff on import of a raw material than the importation of final commodity with the important input, that means the nation usually does this in order to encourage domestic processing and employment. From the given statement we know that textile is a raw material and leather products are final commodities. If the nation want to protect the domestic industries and producers , it should implement 40% on importing leather products and 15% on importing textile. It would protect the domestic industries and thereby it increases their production and employment. If nation imposes higher tariff on final commodity , it can reduce imports . Because higher import tariffs raises the price of importing commodity. It would discourage the consumer to purchase foreign goods due to higher prices. It encourage them to purchase domestic goods. Because import tariff makes foreign goods more expensive and domestic goods more cheaper If import tariff on raw material would be low , domestic producers can start the production for import substitution. Because import tariff reduces imports. It reduces consumer choices . So domestic economy should encourage the domestic production imported goods. Thereby it will protect domestic industries from foreign rivals and it creates wide range of jo opportunities for domestic individuals. As a result employment will rise in domestic economy