Industries with the highest level of nominal tariff rates on their competing imports do not necessarily receive the greatest incentive to expand domestic production. Explain why this is so and how you might go about arriving at a more revealing measure of tariff-based incentives for expanding production.

Question

Quizplus · Accepted Answer

The Answer is The level of nominal tariff rates on competing imports does not necessarily provide the greatest incentive for industries to expand domestic production because there are other factors at play. For example, industries may face non-tariff barriers such as quotas, licensing requirements, or technical standards that can also affect their ability to compete with imports. Additionally, the overall market conditions, including consumer demand, production costs, and access to capital, can also impact a company's decision to expand domestic production.

To arrive at a more revealing measure of tariff-based incentives for expanding production, one approach could be to conduct a comprehensive analysis of the overall trade environment for a specific industry. This could include not only nominal tariff rates, but also an assessment of non-tariff barriers, market demand, production costs, and access to capital. Additionally, conducting surveys or interviews with industry stakeholders to understand their decision-making process and the factors that influence their production expansion decisions could provide valuable insights.

Furthermore, a comparative analysis of industries within the same country or across different countries could also help to identify the relative impact of tariff rates on production expansion incentives. By considering a broader range of factors and conducting a more in-depth analysis, a more revealing measure of tariff-based incentives for expanding production can be developed.

Industries with the Highest Level of Nominal Tariff Rates on Their