Sliding Tariffs
Sliding tariffs are a type of taxation whereby the rate of duty applied to goods imports (or exports) changes as the value of the good changes. Initially proposed as a policy response to the high cost of international trade, sliding tariffs were designed to reduce the economic friction between nations. In essence, the sliding tariff applies a variable rate of duty to goods imports and exports, dependent upon the value of the imported goods. In doing so, the principle aim is to promote free market access while protecting domestic producers and consumers.
At its simplest, sliding tariffs are designed to reduce the impact of higher import costs on poorer nations, by levelling the economic playing field between richer and poorer nations. The sliding tariff addresses the maximum tariff provision, usually found in international trade agreements, which countries can use to control imports from other countries that have more advanced economies. Under the sliding tariff system, these maximum tariffs will be decreased as the value of the imported good rises. The idea is that richer nations can still set tariffs to protect their domestic industry, but those tariffs will fall as the imported good increases in value, creating equal opportunities for all countries imported to and exported from.
The sliding tariff provides an additional level of protection for domestic businesses. It allows for a graduated tax rate on higher-value imports that helps protect local businesses from unfair competition. The sliding tariff also provides a way to encourage more trade between countries. By leveling out the tax rate on imports and exports, countries like those in the European Union are cleaning up the laws policies that inhibit fair trade and open markets.
However, sliding tariffs have been heavily criticized in some circles. The major criticism is that the policy reduces economic incentives, particularly for exporters, who may be unable to make a profit selling their goods in other nations. Similarly, domestic consumers may be effectively hit by higher import costs, due to the lack of competition and thus discrepancy between imported and domestic prices.
For poorer nations, sliding tariffs can be an effective way of stimulating economic growth. By applying a graduated rate of duty, countries can generate some form of international trade, thus creating jobs and other wealth spilling over into their economies. The effectiveness of sliding tariffs in promoting this type of growth should not be underestimated and it should still be considered as an important policy tool for poorer nations.
In conclusion, sliding tariffs are a form of taxation that has the potential to reduce the economic friction between countries. By providing an incentive to trade, sliding tariffs can help stimulate global economic activity, while simultaneously protecting domestic producers and consumers. Such tariffs may be effective for poorer countries in stimulating growth, but have also been criticised for reducing economic incentives and increasing the cost of imports for domestic consumers.
