Types of Tariffs and Trade Barriers
There are several types of tariffs and barriers that a government can employ: * Specific tariffs
* Ad valorem tariffs
* Import quotas
* Voluntary export restraints
* Local content requirements
A fixed fee levied on one unit of an imported good is referred to as a specific tariff. This tariff can vary according to the type of good imported. For example, a country could levy a £10 tariff on each pair of shoes imported, but levy a £200 tariff on each computer imported.
Ad Valorem Tariffs
The phrase ad valorem is Latin for "according to value", and this type of tariff is levied on a good based on a percentage of that good's value. An example of an ad valorem tariff would be a 15% tariff levied by Japan on U.S. automobiles. This price increase protects domestic producers from being undercut, but also keeps prices artificially high for Japanese car shoppers.
Non-tariff barriers to trade include:
A license is granted to a business by the government, and allows the business to import a certain type of good into the country. For example, there could be a restriction on imported meat, and licenses would be granted to certain companies allowing them to act as importers. This creates a restriction on...