In the context of trade policy tools, which of the following is considered as tariff measure?
I. Export taxes
II. Import taxes
Show answer & explanation
Correct answer: C
Explanation
The correct answer is Option 3: Both I and II.
Explanation:
Trade policy instruments are primarily classified into two categories: Tariff Measures and Non-Tariff Measures.
Tariffs are taxes or duties levied on goods at national borders during the course of international trade.
• Import Duty/Tariff: When a good enters India from another country, the tax imposed on it is called an 'Import Tariff.' Its objective is to protect domestic industries from foreign competition.
• Export Duty/Tariff: When a good is shipped out of India, the tax imposed on it is called an 'Export Tariff.' This is often utilized to ensure the availability of raw materials within the country.
Since both are essentially 'taxes' levied directly on the trade of goods, they both fall under the category of Tariff Measures.
Classification of Trade Policy Instruments:
Tariff Measures - Non-Tariff Measures
Import Duty - Quota (Quantitative Limit)
Export Duty - Import Licensing
Specific Duty - Technical Standards and Sanitary Regulations
Ad-valorem Duty - Subsidies
Key Points:
• Objective: The primary objective of tariffs is to regulate the volume of trade in goods by increasing their prices, and to generate revenue for the government.
• Non-Tariff Measures: These are barriers that restrict trade through methods other than taxes—for instance, by fixing a specific limit on the quantity of a good that may be imported (Quota). Important Questions for Upcoming Examinations:
• Question: On what basis is an 'Ad-valorem' tariff levied?
o Answer: Based on the monetary value of the commodity.
• Question: What is it called when a country sets a maximum limit on the quantity of a specific commodity that may be imported?
o Answer: Quota.
• Question: What is the special tax imposed by the government to prevent 'Dumping' called?
o Answer: Anti-dumping Duty.