Theory of Tariffs
Most theoretical analysis of trade policy is undertaken in terms of tariffs — that is, duties levied on imports. There are a number of good reasons for this. First, tariffs are the single device employed most widely for regulating trade flows. Second, except under special circumstances, tariffs are the only measure of trade regulation permitted by GATT. Third, they operate through the price mechanism which represents the heart of modern economic theory. In consequence, tariff analysis can be readily adapted to encompass other trade controls which operate through the price mechanism; for example, export duties and subsidies, import subsidies and quotas and several other types of non-tariff barrier.
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