Vol 3, No 1 (2015)

Analysis of the Competitive Leverage of Protective Tariffs

Fidel Ezeala-Harrison

Abstract

This paper offers a theoretical model to lend further support to previous studies used to call for the need to remove protective tariffs. When the United States imposed a 15% tariff against imported steel and some other products in 2002 (which was later removed after 2 years), the measure was seen as a clear means of protecting jobs in the steel and allied industries, which have been faced with stiff competition from foreign producers. However, whether or not the move really proves to be ultimately helpful to the US economy is quite a different matter that needs to be addressed and verified. When countries implement tariff protection for their domestic firms, the most common reason given is to ensure that workers’ jobs are not jeopardized by “unfair” foreign competition. This excuse sounds reasonable, except that it is also economically flawed. While the short-run impact of such a measure might be appreciated, its long-term effect is less than favorable, and may, in fact, be damaging to not only the economy’s competitiveness but also the economic state of being of the workers whom the measure sought to protect. This paper offers an analysis of these impacts and their policy applications.

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Keywords

Competitive leverage; Optimum tariff; Protectionism; Infant industries; Cost-Benefit ratios

Publication information

Volume 3, Issue 1
Year of Publication: 2015
ISSN: 1857 - 8721
Publisher: EDNOTERA

How to cite

Ezeala-Harrison, F.: Analysis of the Competitive Leverage of Protective Tariffs. Journal of Applied Economics and Business, Vol 3, No. 1, 14-26. (2015)