(2011, 02). Proton vs Perodua Case Study

Topics: International trade, Free trade, Tariff Pages: 34 (7470 words) Published: February 7, 2013

International Trade
Free, Fair and Open?

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Protectionism? Tariffs and
Other Barriers to Trade

Please cite this chapter as:
Love, Patrick and Ralph Lattimore (2009), “Protectionism? Tariffs and Other Barriers to Trade”, in International Trade: Free, Fair and Open?, OECD Publishing.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.


Goods and services do not flow completely freely among countries, even among those with excellent relations. Countries put up barriers to trade for a number of reasons. Sometimes it is to protect their own companies from foreign competition. Or it may be to protect consumers from dangerous or undesirable products. Or it may even be unintended, as can happen with complicated customs procedures. Tariff barriers have been reduced considerably over the past few decades but other obstacles remain. Getting rid of unnecessary trade barriers would give a great boost to global economic welfare.

Tariffs and Other
Barriers to Trade

4. Protectionism? Tariffs and Other Barriers to Trade

By way of introduction…
“Would you mind opening your suitcase?” Your heart sinks as you picture that extra bottle of perfume the customs officers are going to find. Or maybe you’ve got nothing to hide but any delay means you’ll miss your connection. What if that guy who bumped into you at passport control slipped a kilo of cocaine into your bag?

You may not think about it in these terms, but you’ve just entered the world of trade barriers. Any international airport provides a microcosm of the issues we’ll be discussing in this chapter. The language may be more technical and the implications more global, but tariffs and non-tariff barriers, quotas and prohibitions affect us all, either directly, as when our luggage is examined at a border crossing, or indirectly through the price we pay and the constraints on what we can and cannot buy. Customs inspectors, after all, are not just trying to catch people going over their duty-free allowance. They are looking for dangerous items or items that are banned for some reason, like certain animal and plant species. They are also controlling the import of entire categories of merchandise.

The opening of markets has boosted trade and economic growth worldwide in the past few decades. Yet tariffs – taxes imposed by importing countries on foreign goods – remain a key obstacle to market access. The potential benefits of further reducing this obstacle are significant. The OECD estimates that scrapping all tariffs on merchandise trade and reducing trade costs by 1% of the value of trade worldwide would boost global welfare by more than $170 billion a year, in some areas adding the equivalent of up to 2% to GDP.

Conservative estimates suggest there would be significant
welfare gains for developing and developed countries alike.
Under many of the scenarios, developing countries as a group could expect greater welfare gains than the developed countries. But all regions stand to gain if tariff reductions are combined with substantial progress toward reducing trade costs, such as through more efficient customs procedures.

u In this chapter we’ll look at different kinds of trade barriers. We’ll examine formal barriers, such as tariffs on imports, but also other kinds of barrier that can hinder trade, such as complicated


OECD Insights: International Trade

4. Protectionism? Tariffs and Other Barriers to Trade

administrative procedures. We’ll discuss how trade barriers can sometimes be useful, even vital, but also how they can miss their mark and simply be an attempt to protect the interests of a given group at the expense of the...
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