Protective Tariff

Protective Tariff 

a type of customs duty that serves as a barrier against penetration of the domestic market by certain foreign goods and against passage of these goods through the country. Protective tariffs also serve to impede the export of domestic raw materials and semifinished products. They are intended to create optimal conditions for domestic industry (see also).

In the formative period of capitalism, protective tariffs were used to protect developing national industry from foreign competition. In the late 19th century, for example, the United States instituted protective tariffs to limit the entry of British goods into the domestic market. Protective tariffs are now used primarily to maintain high domestic price levels and to ensure maximum profit for the monopolies. A modified form of protective tariff has been established by international state-monopoly alliances, such as the European Economic Community (Common Market), in the struggle to dominate the world capitalist market and capture spheres of economic and political influence. This tariff policy has a negative effect on European trade and hurts the developing countries of Africa and Asia.

A modern form of protective tariffs are high antidumping and compensatory duties. They are employed by importing countries as a supplement to conventional customs duties in cases where the exporter sells goods on foreign markets at prices lower than those in effect on the domestic market. The size of the antidumping duty is the difference between the price of the article in its country of origin and the export price. The United States introduced this type of duty in the 1920’s and 1930’s.

Prohibitive tariffs are a variety of protective tariff with very high rates, which can amount to 30 percent and more of the price of the article and sometimes can even exceed the price of the article. They appeared in the second half of the 19th century as a reaction to the abolition of a ban on the export and import of certain articles and the introduction of the policy of free trade. Prohibitive tariffs are common in many developed capitalist countries. For example, during the 1960’s about one-sixth of all the items on the US customs list had prohibitive tariffs. In the socialist countries, prohibitive tariffs account for a negligible share of customs revenues.

Aggressive duties are one of the types of protective tariff that set very high rates for a particular product or group of foreign goods. They are used by the United States, France, and the members of the Common Market. Examples are the duties established by a law passed in the United States in 1971, which restricts the import of textiles, stereo equipment, television sets, automobiles, footwear, and other goods from Japan and the Common Market countries. In their turn, the members of the Common Market have adopted single-schedule tariffs of the aggressive type in trade with other countries. This has enabled the Common Market countries to capture a significant part of the European Economic Community market and the markets of numerous countries in Asia and Africa from foreign rivals, primarily the United States. Aggressive duties are also used within the European Economic Community. In 1974, for example, Italy implemented major protectionist measures, including the introduction of aggressive protective tariffs, and sharply reduced the importation of automobiles, as well as meat, butter, cheese, and other consumer goods, from the countries of the European Economic Community, particularly the Federal Republic of Germany. This policy created better conditions for the development of certain sectors of national industry but led to a new rise in food prices and a drop in the standard of living of the working people. Prohibitive and aggressive tariffs are used as a weapon of superprotectionism to overcome tariff barriers and capture markets in the developing and economically underdeveloped countries.

The socialist countries use protective tariffs to bolster sectors of their economies. For example, in the first Customs Tariff of the Land of the Soviets (1922), protective tariffs were applied to the products of sectors, such as the leather and cotton-textile industries, that were being rebuilt after the devastation of the war years. In 1924 a new protective tariff was instituted. Protective duties were established for machinery and raw materials in the prewar tariffs of the USSR of 1927, 1930, and 1932. In the new (1961) Customs Tariff of the USSR, a large majority of the duties are no longer of the protective type.

L. I. TUL’CHINSKII