SS1 Commerce Lesson Note on Tools for Trade Restriction and Export Promotion

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TOPIC: FOREIGN TRADE (INTERNATIONAL TRADE)

CONTENT:

1. Tariffs and reasons for the imposition of tariffs
2. Tools for trade restriction and export promotion
3. Documents in foreign trade

SUB-TOPIC 1: TARIFFS AND REASONS FOR THE IMPOSITION OF TARIFFS

WHAT IS TARIFF? Import tariff which is also called import duty, is the tax levied on goods imported into the country. The tax is expressed either as a percentage i.e. fraction of the value of an imported good or per unit of it. When expressed as a fraction of the value of good, it is called an ad valorem import tax. An example is an import duty of 10 percent of value of imported cars, so that import duty of N200,000 would be paid on a car costing N2 million. When expressed on per unit basis, it is called a specific duty. In order words, while an ad valorem duty is calculated on the monetary values of the imported goods, a specific duty is calculated on the weight of quantity of imported goods, irrespective of their monetary value or the market price. Imported duties are assessed and collected in Nigeria by the customs Authority called the Nigerian Customs Service (NCS).

REASONS FOR THE IMPOSITION OF TARIFF

1. Revenue generation: Tariff revenue is a major component of government total revenue. It comes only after the government revenue derived from petroleum activities
2. Infant industry protection: Industries have to be protected against unfair competition from abroad. Imposition of tariffs on imports coming from other countries’ competitors is a way of accomplishing this protection.
3. To prevent dumping of goods: Sometimes foreign suppliers deliberately sell imports at a very low prices, even if this means they would be making a loss by so doing. Their home governments too may subsidize them to enable them to sell cheaply in other countries.
4. A tool for settling political score: Tariffs may be imposed on goods emanating from countries perceived to be unfriendly.
5. Improvement in the balance of payments deficits: Imposing tariffs helps to discourage importation of goods which in turn corrects unfavorable balance of payments
6. Protection of domestic currency against depreciation: Depreciation is the use for loses in value of an asset due to wear and tear in the course of its uses.
7. Retaliation against tariff imposition by trading partners as an instrument of trade negotiation.
8. A change in income distribution pattern.
9. To prevent importation of dangerous goods
10. To promote self sufficiency

EVALUATION:

1. What is tariff?
2. Give 5 reasons for the imposition of tariff in Nigeria.

SUB-TOPIC 2: TOOLS FOR TRADE RESTRICTION AND EXPORT PROMOTION

Tools for import restriction

1. Import duties or tariff: This is the tax imposed on the importation of imported goods coming into the country.
2. Quota or qualitative restriction: This occurs when there is an upper limit to the quantity that can be imported of a particular good.
3. Embargo: this refers to an outright ban on the importation of a good
4. Qualitative barriers: These refer to various impediments and inhibitions that are put in place regarding the quality attributes and specification that some goods must possess for them to be permitted to be imported into the country.
5. Devaluation
6. Bilateral trade agreements
7. Subsidy to domestics producers
8. Excise duty reduction
9. Import license.

Tools for export promotion:

1. Tax concession: Tax exemption and concession are often given to export industries and activities, as an incentive to produce more. It is a form of what is called fiscal incentive.
2. Grant, subsidies and loans: This is another forms of fiscal incentive . The government gives grants or subsidies to export industries to assist them. Credit facilities are also sometime provided on much more concessionary terms (in term of interest rates, maturity, collateral requirements when compared with loans from banks.
3. Underwriting of risk associated with export: Due to the operations of exporters in less familiar grounds of foreign countries, they faced peculiar risks, including the risks of non-payment by the foreign customers.
4. Provision of information on export potentials on opportunities: Government often enlightens industrialists and entrepreneurs on the opportunity and potentials that in exporting certain products to specific industries.
5. Reduction of export duties.
6. Devaluation of local currencies.
7. Infrastructural development
8. Organizing international trade fairs

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