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Reasons for higher tariffs on Agricultural goods
Tariffs are higher on agricultural commodities compared to industrial products due to high international protection accorded to the farm products. The existing disparities in tariffs allow some countries to protect their agricultural sectors at the expense of other competitors within the global market. Such distortions create significant barriers to markets, especially for competitive producers of agricultural commodities. Generally, tariffs affect three parties comprising of the country imposing the tariff, the exporting country, and the country importing commodities (Gibson et al., 2001, pp. 3-24).
Effects of tariffs on prices of domestic and imported goods
Tariffs contribute towards adjustment of costs on goods within local markets. All products crossing borders are taxed based on the tariffs of the country involved it determines prices of the commodities within the country. Imposing tariffs increase the prices of imported goods hence reduces competition, which otherwise could have been felt by domestic producers. The differences in agricultural tariffs interfere with farm production, and in such cases, countries tend to grow products that are heavily protected than those in which they are competitive internationally (Moroney and Sullivan, 2006).
Effects of tariffs on consumers and businesses
Domestic producers are not always subjected to the act of reducing prices for their products owing to high prices attached to imported commodities. It makes consumers pay highly for imported goods. Also, tariffs distort market signals, which are normally used in the processes of economic resource distribution hence influencing the nature of business operations. High tariffs lead to higher prices, which ultimately affect the nature of supply since farmers respond by increasing output.
In the long run, consumers tend to respond by buying less due to higher prices hence affecting the demand (Gibson et al., 2001, pp. 3-24). The effects felt within domestic markets at times are the same in the global market. It is since the aspect of increased supply and less demand has the capability of reducing levels of import.
Necessity of tariffs
Tariffs are necessary since they provide the best tool used in protecting domestic industries. Various countries provide the necessary protection (on local sectors and commodities) against competition from imported commodities through the use of tariffs. At the same time tariffs offer channels of income transfer across the value-added chain and also from consumers to producers. However, it has some spillover effects when imposed on higher rates since it has the capability of decreasing overall wealth through the distortion of production and consumption channels. The benefits associated with tariffs are normally concentrated amongst small groups of producers (Gibson et al., 2001, pp. 3-24).
Nina, I agree with your comments on the fact that high tariffs imposed on agricultural commodities are meant to protect the industry. The agricultural sector is a very crucial sector within every country’s economy owing to its substantial contributions hence requires protection from external competition. Despite the disadvantages associated with tariffs, the idea is beneficial in the long-run. Indeed, tariffs create barriers since they impose costs on commodities in countries where they are applied and internationally. The negative impacts are mostly felt by consumers and producers.
Kelly, I tend to slightly differ with your main opinion concerning high tariffs imposed on agricultural commodities. Though this might be one of the reasons, even industrial goods currently face high risks, especially from acts of piracy while on transit. From your last paragraph, I wonder how tariffs can implement rules and regulations. However, imposing tariffs helps in regulating the exchange and marketing of commodities within the international market since the order is created to avoid exploitation of domestic production.
Gibson, P. Wainio, D. W. & Bohman, M. (2001). Profiles of Tariffs in Global Agricultural Markets. Economic Research Service, U.S. Department of Agriculture. Agriculture Economic Report 796 (1), 3-24.
Moroney, T., & Sullivan, B. K. (2006). Growers of cranberries give thanks for exports. International Herald Tribune. Web.