The rate of effective protection is equal to the nominal tariff imposed on the imported product only if the domestic producer utilizes imported components in the production of the good.

Question

Quizplus · Accepted Answer

The rate of effective protection is not only affected by the nominal tariff, but also by other factors such as the cost and availability of inputs, the efficiency of production processes, and the competitiveness of domestic and foreign producers. Therefore, it is not necessarily equal to the nominal tariff even if imported components are used in production.

The Rate of Effective Protection Is Equal to the Nominal