My macro lecture gave a lecture on tariffs today, and devoted quite a bit of the discussion to the idea that tariffs are beneficial to 3rd world markets because it prevents the "wealthy elite" from continuing to import; rather than having to start producing. The way I see it: How can a tariff be beneficial to an emerging market that is largely an export based economy, where imports are relatively low due to the fact that they can't compete on price. If anything a tariff reduces foreign market relations; therefore leading to less of an ability to export.
Because there are certain items that people just "have to have" that the emerging market governments want to get a piece of. For instance...In asia, everyone wants ipods/ipads/iphones and sales will not be hurt much for an extra 10 or 20% tariff. (someone willing to pay $300 for an iphone is not going decide he doesnt want one now that its $330) Tariffs are a way to "spot tax" on people without them knowing. Government doesnt want to just raise sales tax on everything so they spot tax (place tariffs) on certain items.
Sorry, but your understanding of tariffs is completely wrong. Tariffs are in place to protect domestic producers from foreign competition, and thus resulting in high prices. Some will argue that this hurts the consumer (high prices), but I say it maintains steady employment. I mean who wants their $15 an hour wage cut in half in order to compete on price with an emerging economy? Yes, it is a tax, and yes the burden largely falls on the consumer, but it's at the cost of national security. My only question is why are tariffs useful to weak, exporting economies. My teacher argues that: If tariffs are not in place, the rich elite - of the third world nation - will continue to import and not create industry, I kind of find this hard to believe.
Based on your own post of what tariffs are; there's no difference between, a. the government imposing higher taxes on it's citizens in order to subsidize a certain industry (usually an industry it partially or wholly owns, or is bribed by), and b. imposing tariffs in order to protect that certain industry. The only reason they usually carry out b and not a, is because it attracts less criticism. A random link on Protectionism: http://www.globalenvision.org/library/15/1211 ------------------------------------------------------------ Most humans are incompetent and stupid, and they are consciously or unconsciously aware of this, so they push their government (made of the same stupid and incompetent people) to take care of them so they don't have to suffer the consequences of their incompetency. I say fine, let the government impose laws and regulations that protect the stupid majority from their own incompetency and stupidity, but the government shouldn't impose those laws on everyone; http://www.elitetrader.com/vb/showthread.php?s=&postid=2962272#post2962272