Tariff the Shield and FTA the Spear :: Essays Papers

Tariff the Shield and FTA the Spear There was time when countries fought hotshot some other to take others territory because land meant power and royal house at that period. All of the great conquerors dreamed of ruling whole earth under their feet. As time passed the meaning of land became proficient a boundary that identify each country. Then what takes the position of land? What way power and royalty in modern world? With globalization countries cope peerless another again with their economic power to have more money. That is right. Now we are living in the world that money is a symbol of power. Threaten countries by attack of all different kinds of thrift had to make certain level of tool to protect themselves. And tax is one of the most powerful economic shields.The purpose of tariff is largely categorise by cardinal big concepts. First and original concept is to react home(prenominal) industries from foreign capital that would have comparative or infinite adva ntage to domestic products. Second one is to have extra expediency from imported goods. Usually the profit is from taxation due to tariff. Sometimes multinational conflict occurs between countries when the competition is over-steamed.First of all, we need to look how tariff works in theory. There are three basic functions on the graph before imposing tariff. Supply curve has positive side of meat and going toward upper right and demand curve having negative careen is pointing down right. These two are most basic functions of economics. There is one more assembly line that is parallel to X-axis. This implies world scathe and where the intersections meet with this line creates market ply S0 and market demand D0.Now lets impose tariff to protect our industry. Tax due to imposing tariff will push world price line upward. Producers are automatic to produce more goods because the price is change magnitude and market supply moves from S0 to S1. Similarly, domestic consumption decr eases from D0 to D1 since consumers are willing to buy less due to increased price after world price with tariff. As you see there are four empty areas between original world price line and world price with tariff divided by supply and demand functions. These four have their own meanings and they made net outlet or national loss. Area a is a increased manufacturers surplus. Area c implies government tariff revenue, and at last, those two small triangles are dead weight losses which are just nothing but wasting.