7 Benefits of Export Import Duties for Businesses and Consumers

Export import duties are taxes or fees imposed by a country’s customs authorities on goods that cross its borders. They are a source of revenue for the government and a way of regulating trade. Export import duties can have various effects on businesses and consumers, depending on their type, rate and structure. Here are some of the benefits of export import duties for different stakeholders.

1. Protecting domestic industries

Export import duties can help protect domestic industries from foreign competition by making imported goods more expensive or less available. This can encourage local production, employment and innovation, as well as preserve national security and cultural identity. For example, the United States imposes high tariffs on imported steel and aluminum to protect its domestic producers from cheap imports from China and other countries.

2. Promoting fair trade

Export import duties can also be used to promote fair trade practices and prevent dumping, which is the practice of selling goods below their cost of production or market value in order to gain market share or drive out competitors. Dumping can harm domestic industries and consumers by lowering prices, profits and quality. Export import duties can counteract dumping by raising the price of imported goods to a fair level. For example, the European Union imposes anti-dumping duties on various products from China, such as solar panels, bicycles and steel pipes.

3. Raising government revenue

Export import duties are a source of income for the government, which can be used to fund public services and infrastructure, reduce budget deficits or lower other taxes. Export import duties can also help the government balance its trade account by reducing imports and increasing exports. For example, India collects about 15% of its total tax revenue from customs duties, which helps finance its social welfare and development programs.

4. Supporting developing countries

Export import duties can also benefit developing countries by giving them preferential access to developed markets, reducing their dependence on foreign aid and enhancing their economic growth. Many developed countries offer lower or zero tariffs to developing countries under various trade agreements or schemes, such as the Generalized System of Preferences (GSP), the African Growth and Opportunity Act (AGOA) and the Everything But Arms (EBA) initiative. These schemes aim to stimulate exports, diversify production, create jobs and reduce poverty in developing countries.

5. Lowering consumer prices

Export import duties can also lower consumer prices by increasing the supply of goods in the domestic market, creating more competition and reducing monopoly power. This can benefit consumers by giving them more choices, better quality and lower costs. For example, Japan has lowered its tariffs on agricultural products such as beef, pork and cheese under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which has led to lower prices and higher consumption of these products.

6. Encouraging environmental protection

Export import duties can also encourage environmental protection by discouraging the import of goods that are harmful to the environment or produced in an unsustainable way. This can help preserve natural resources, reduce pollution and combat climate change. For example, the European Union imposes a carbon border adjustment mechanism (CBAM) on imports of certain goods that have a high carbon footprint, such as cement, steel and electricity. The CBAM aims to prevent carbon leakage, which is the relocation of production to countries with less stringent environmental regulations.

7. Fostering regional integration

Export import duties can also foster regional integration by creating free trade areas or customs unions among neighboring or similar countries. This can enhance economic cooperation, political stability and cultural exchange among the members of these groups. For example, the Association of Southeast Asian Nations (ASEAN) has established a free trade area among its 10 member states, which has eliminated tariffs on almost all goods traded within the region.

The impact of export import duties on global demand

Export import duties are taxes or fees imposed by governments on goods that cross international borders. They can affect the global demand for goods and services in various ways, depending on their level, structure, and purpose. In this post, we will look at some statistical evidence of how export import duties have influenced the global demand in the export import industry in recent years.

Export import duties and trade volumes

One way to measure the global demand for export import goods and services is to look at the trade volumes, i.e. the value or quantity of goods and services exchanged between countries. According to the World Trade Organization (WTO), the world merchandise trade volume declined by 5.3 per cent in 2020, while the world commercial services trade volume dropped by 15.5 per cent. These sharp contractions were mainly due to the COVID-19 pandemic, which disrupted global supply chains, reduced consumer spending, and imposed travel restrictions.

However, export import duties also played a role in affecting the trade volumes, especially in some regions and sectors. For example, the trade tensions between the United States and China, which involved the imposition of higher tariffs on billions of dollars worth of goods, reduced the bilateral trade flows between the two countries by 16 per cent in 2019 and 10 per cent in 2020. Similarly, the United Kingdom’s exit from the European Union (EU), which resulted in new customs procedures and tariffs for some goods, reduced the UK’s exports to the EU by 40 per cent and imports from the EU by 29 per cent in January 2021 compared to December 2020.

Export import duties and trade prices

Another way to measure the global demand for export import goods and services is to look at the trade prices, i.e. the unit values or average prices of goods and services traded between countries. Export import duties can affect the trade prices by increasing or decreasing the cost of production, transportation, and consumption of goods and services. Higher trade prices can reduce the global demand by making goods and services less affordable or competitive, while lower trade prices can increase the global demand by making goods and services more attractive or accessible.

According to the WTO, the world merchandise export price index fell by 3.3 per cent in 2020, while the world commercial services export price index declined by 4.3 per cent. These decreases were largely driven by the lower demand and supply of goods and services due to the COVID-19 pandemic, as well as by the lower prices of oil and other commodities. However, export import duties also had an impact on some trade prices, especially for those goods that faced higher tariffs or lower subsidies. For instance, the US tariffs on Chinese imports raised the US import prices of affected products by 20 per cent on average between 2018 and 2019. Likewise, the EU tariffs on UK exports increased the EU import prices of some UK products, such as fish and seafood, by up to 18 per cent in January 2021 compared to December 2020.

Export import duties are an important factor that can influence the global demand for goods and services in the export import industry. They can have positive or negative effects on trade volumes and prices, depending on their level, structure, and purpose. The COVID-19 pandemic has overshadowed the impact of export import duties in 2020, but they remain a relevant issue for international trade policy and cooperation.

References:

http://www.cbp.gov/linkhandler/cgov/newsroom/publications/trade/iius.ctt/iius.pdf

https://www.wto.org/english/res_e/booksp_e/tariff_profiles19_e.pdf

https://www.cbp.gov/sites/default/files/documents/Importing%20into%20the%20U.S.pdf

http://fita.org/countries/us.html?ma_rubrique=selling_and_buying

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https://taxation-customs.ec.europa.eu/customs-4/calculation-customs-duties/customs-tariff/eu-customs-tariff-taric_en
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