Talk:Tariff

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[edit] tariff

6-29-05 Historical material added by RJensen (I own the copyright and give its use to Wikipedia). from what i know bout tariffs(barely learned today)this is another way of way of the U.s and multi billion dollar companies to stay on top of the game........just an idea

12-05-2008

I suggest that the image for tarrifs be enlarged. Its a strange file format meaning it cant be downloaded, enlarged, and viewed either

12-6-05 i dont know what tariffs are but my wicked teahcer has made me research it to day.

12-7-05 I know i hate tariffs and there some stupid stuff thats TAKING OVER THE WORLD

12-7-05 If the tariffs dont take over the world i just might and you can be my side kick!!!!!!!!!

12-7-05 im sorry but i prefer 2 work on my own to destroy the teriffs for evil revenge.gosh, im starving...... so u have something 2 eat? im so glad im a girl cuz then i can like boyz

12-8-05 okay what exactly are tariffs it would be nice if some one actually put what they were then it would be so much easier for some one like me who needs the answers for home work or any other stupid assign ment like this at school. okay i have this friend for example who is really stupid when it comes to computer stuff and she hates to read but shes just plane stupid so it probably wouldnt make a difference even if you did have it written in the sky but i would really like it if you had more answers to our questions about tariffs. you probably had a teacher back in high school that made you look up tariffs and it was a pain in the behind. cant you just simply make it easier for us slowpokes that dont know anything more than what color the ocean and sky are.

  • Good point. I added some clarification at the beginning. Rjensen 18:56, 9 December 2005 (UTC)

[edit] Tariffs in American history + low tariff policy

These sections of the article is large enough, and different enough, to form their own article. I dont think this article should start covering the history of tariffs in every single country, it distracts away from the topic at hand. Dupz 23:51, 10 November 2005 (UTC)

  • Thanks to recent world trade agreements, tariffs are mostly of historical importance, and therefore need historical treatments in an encyclopedia. Most of the scholarship has focused on the tariff policy of the largest economies (Britain to 1880 and US since then.) I also added more on Canada. Rjensen Rjensen 07:43, 11 November 2005 (UTC)
  • I dont doubt that the content deserves to be in the encyclopedia, but I just think that we should stick with brief summaries of tariffs in regional history, and put what we have into an article, perhaps named "Tariffs in North American history". I think we should stick with things like arguments for/against, and the economics of tariffs. Dupz 08:49, 14 November 2005 (UTC)
  • Today's arguments for and against tariffs are either based on mathematical economics (which is covered in the article), or historical evidence. Every recent discussion of tariffs contains many historical references, and it is almost impossible to engage in a discussion for/against tariffs if you don't know tariff history. So it belongs with the main article. What the article DOES need is more on the tariff history of Britain and Germany, which are also important models. I did add material on Canada and plan to add some British material soon. Rjensen Rjensen 18:11, 14 November 2005 (UTC)

[edit] Merge from Protective tariff

Support — Tuvok[T@lk/Improve me] 07:39, 27 February 2007 (UTC)

support - there is nothing in the other article that isn't in this one, so I've simply redirected it. DJR (T) 17:11, 16 May 2007 (UTC)

[edit] The analysis model

The analysis is exteme, it is right for a "small country"(small consumption amount) with less efficient producers. For a large country, there is no such thing that its supply is elastic, but the analysis is not deviate too much (The S will appear on the diagram). However, when the country's producers are equally efficient or much more efficient than the world, no matter it is small or large, then the diagram is wrong! More efficient than the world means at the world price, producers can afford to produce more than others. The analysis need to be changed, or just state that it is only suitable for a less efficient small country. Jackzhp 15:32, 23 May 2007 (UTC)

[edit] Comparative advantage and trade restrictions

The analysis is misleading for any country, as it assumes that the entire economy is at a comparative disadvantage. The model is a reasonably good (though incomplete) presentation of the economic situation from the perspective of the few inefficient producers within the local economy (or as the article calls them, the "heroes") who are getting squeezed by the shift in the local economy toward more productive areas.

Despite the non-neutrality of the term, "heroes" may be apt in that tariffs generally arise to protect traditional industries within a local economy, which the local population may see as having some cultural benefit.

Within a given state of technology and innovation, to provide more of one good or service necessarily involves providing less of others. The tariff will, as described in the analysis, shift the local economy towards production by the inefficient "heroes", but at a cost to those who are engaged in more productive enterprises.

For that reason, I think that the article could be improved by retaining the limited economic analysis it presents, but expanding the analysis with multiple goods (two goods at a minimum) to show what happens in the economy as a whole. That would provide balance between the benefits of trade to the nation as a whole and the disadvantages of such liberty to the inefficient "heroes".

That is, the social issue that is raised in any dynamic economy is what to do about people who have specialized in areas that are no longer an efficient use of the nation's resources. These people may at one time actually have been heroes.

[edit] Comparative advantage

The primary argument widely advanced for trade is that it allows local economies to apply their scarce resources on their areas of comparative advantage, and use trade to buy other goods.

Briefly (for more, see the reference), the principle of comparative advantage can be understood by first considering absolute advantage. A producer has an absolute advantage with respect to a given good if it is more efficent at producing that good than any other producer. A producer has a comparative advantage with respect to the good if it is more efficient at producing that good than it is at producing any other good. Thus every producer has a comparative advantage at something, although it perhaps is at an absolute disadvantage in everything. When considering comparative advantage, one must remember that value is determined by the consumer, so one cannot be efficient at producing a good that is worthless. Absolute advantage considers only a single good, in isolation, and thus need not take into account value to the consumer.

Not surprisingly, it turns out that the total economy is most productive when all producers (nations, industries, individuals, etc) produce what they are best at (i.e. produce maximum value with minimal use of available resources), and trade for other goods. In other words, total wealth is maximized when each producer produces those goods in which that producer has a comparative advantage. In a free market, the pressure on producers to shift to this state of affairs is provided by price.

[edit] A two-good model

The model in the article, however, tracks only the effect on a single good, for which the local economy is at a comparative disadvantage. If the good were at a comparative advantage, the price in the international marketplace would be higher than the price point in the local economy without trade. That is, trade creates price incentives that shift the local economy from areas of comparative disadvantage to areas of comparative advantage and that shift the world economy to buy, from the local economy, those goods that the local economy produces with comparative advantage.

The supply curve in the local industry has non-zero elasticity because there are other industries in the local economy that have competing demands for local resources. Since a local economy must necessarily, by definition, have some areas of comparative advantage, the reduction in access to resources at the lower price (and resulting reduction in quantity supplied) involves greater use of those resources in areas of greater comparative advantage. So the model could be improved significantly by considering an economy of two goods rather than one, at different comparative advantage. The new good (call it β) would be enhanced by trade and the other good (call it α) would be like the one in the model whose production would be diminished in the face of international trade.

Under the two-good model, trade improves prosperity by allowing resources to be used in the industry of greater comparative advantage. The tariff, on the other hand, protects the industry α, shifting resources to that industry and away from the competing, more productive, industry β. Whether the trade is limited by an import tariff or by other import restrictions, the price will still (in the example) rise and the areas under the curves will change in exactly the same way. The tariff (or other trade restriction), raises the demand curve for domestic goods α (by restricting access to the imported alternative), but at the same time it raises the supply curve for β (the supply curve for β rises because it needs to pay a higher price for those resources in which it competes with α--all suppliers are competing for the scarce economic resources of the nation). The increase in supplier surplus in α will thus come at a reduction to supplier surplus in β, however the increase in the consumer surplus in domestically produced α will be more than offset by the reduction in consumer surplus for imported α, and the reduction in the total consumer surplus in α will be joined by a reduction in consumer surplus in β. Thus the trade restriction will leave the nation poorer.

The article describes the weakness in the sentence "If new forms of production are not found in time, the nation will go bankrupt, and internal political pressures will lead to debt default, extreme tariffs, or worse." This sentence conveys the assumption in the article that alternate productive uses for the resources of the nation are not readily available, which seems to say that the nation is at a comparative disadvantage in everything, contrary to the definition of comparative advantage.

[edit] Competitive Pressure

The model assumes that the import problem arose because of a shift away from pre-existing barriers to trade, perhaps transportation has become cheaper or other import restrictions have been relaxed. Under that assumption the status quo ante was a price point at B (in the diagram), but foreign competition led to a shift in the demand for domestic goods in industry α, and a shift in the price point for those domestic goods to G.

However, tariffs are also proposed when imports arise for another reason. Generally, there has been a shift in the supply curve. Suppose that the nation has developed a new industry β, for which it has a comparative advantage, and which competes for resources with the good α that has been modeled. Before the innovation, the α supply curve would have been lower, as there were fewer alternatives competing for the resources involved. Perhaps the original supply curve achieved a price point at J, at a price of $50. But now, with the new industry, the supply curve has risen because the new industry β is competing for those resources, so that domestic production falls to G, and this is blamed on "cheap imports" that fill the gap between Y1 and Y2, and which keeps the factory from full production at the old wages. Workers are being laid off from industry α, and factories are closing (but, curiously, overall national employment doesn't drop and neither does GDP). In this scenario, even though imports are rapidly increasing as domestic production declines, the real competition for jobs in industry α is not foreign competition, but rather the homegrown development of the comparatively advantageous industry β.

During the development of industry β and the corresponding downsizing of domestic industry α, the reallocation of resources is likely not uniform. The supply curve for industry α corresponds to a set of demand curves for the resources used by industry α in production. When a factory in industry α closes, it doesn't retain all of the workers who have no alternative as good as staying employed at their old wage, and as the industry is downsizing, even along the horizontal line represented by the global supply curve, there will be downward pricing pressure on whichever suppliers have the least elasticity of supply (e.g. workers whose skills are specific to industry α.)

[edit] Economic pressure

The article states, "Moderate tariffs would slow down this process, allowing more time for new forms of production to be developed." Since the tariffs reduce overall prosperity, they cannot slow down any process of a nation's becoming bankrupt, but they would slow the shift in the economy from industry α to industry β, and the opportunity costs from that might be less visible than the disadvantages to those workers in industry α who were displaced with only less attractive available alternatives.

The statment about bankruptcy, however, seems to imply a mercantilist theory that a trade deficit is bad because money leaves the country. That argument for tariffs is widely in disrepute, both on the grounds of whether money does leave the nation and on the grounds of whether it is bad, but it is widespread and so it deserves some attention in the article. However, it should be considered in the article because the belief is widely held by people other than economists.

I think that the article has some merit in that it is certainly the case that some people, mainly specialists in industries of comparative disadvantage, are disadvantaged by trade and by the development of new industries of comparative advantage within the national economy. The article also makes a valid point about tariffs possibly being relatively easy taxes to collect. But the article does a disservice by suggesting that trade might make a nation poorer or create a disadvantage for a nation as a whole.Mazzula 19:36, 15 July 2007 (UTC)