Import Tariffs and Export Tax in International Economics

QUESTION

Table of Contents
INTRODUCTION...........................................................................................................................................3
Question: 1..............................................................................................................................................3
Question: 2..............................................................................................................................................4
CONCLUSION...............................................................................................................................................6

INTRODUCTION
International economics is the branch of economics concerned about how international trade policy
should be optimally framed in order to reap enough benefits out of the same. The present report is based
on two major elements of international economics that import tariffs and export tax. Import tariffs will be
discussed with reference to China and how it leads to alteration in its distribution of real income will be
discussed. And export tax will be discussed in the context of Australian economy who is giant among iron
ore exporters in the world.
Question: 1
It is a common act generally undertaken by the developing country’s government to impose
higher duties and tariffs on goods that being imported in the country in order to ensure desired
growth of the industries of which goods are being imported from other countries. Such act of
imposing tariffs on imported goods results in higher price of these goods in the domestic market
and thus encourages domestic market for the production of these imported goods and
accordingly protection can be ensured for domestic industries in terms of protecting them from
forcefully selling their produced goods at a competitive price. Tariffs results in making imported
goods more expensive which leads to higher costs for domestic who rely on imported materials
for producing their goods and accordingly leads to charging higher prices from customers
making them unhappy and changes their real income level. In this way, countries like China who
is imposing higher tariffs on the goods that has been imported to their domestic region may alter
the countries distribution of real income.
Now, in this section while discussing how China’s distribution of real income among its citizens
can be altered due to imposing tariffs on the imported goods, an economic theory related to
providing protection to the domestic producers and industries will be discussed simultaneously.
This theory is known as a protection theory in economics.
Theory of protection is a very important issue concerning foreign trade. There is always a
question that in order to provide protection to domestic industries whether tariffs should be
imposed or quantitative restrictions in terms of licensing and quota should be applied.
As per this theory of protection, tariffs are considered as an important means of providing or
ensuring protection to the industries that are operating at a domestic level (Brandt and Morrow,
2017). The protection is provided from competition that these domestic industries are forced to
face in terms of lower price of goods that are imported from other countries by Chinese
importers.
In a country like China, tariffs are considered as the main means through which protection can be
granted to domestic industries. The protection to these domestic producers are provided from
competition that take place due to availability of lower price products that has been imported by
Chinese citizens from foreign producers. The rates of these tariffs are not that high which makes
the complete prohibition of imports in the nation but instead of that it is always kept under
control and aims to equalize the price of the domestically produced goods and imported goods.
Accordingly, due to rise in price of imported goods in the country like China, foreign producers
from who Chinese importers are importing goods loses their competitive strength in Chinese