Indeed, your columnist has been sharply critical of the government’s latter-day return to tariff protection in more than one recent column. It is easy to assume cynically that recent tariff increases are misguided and ill-informed. At that time, tariff barriers were used to induce a foreign investment inflow from other countries—this is what became known as the “tariff jumping" motive for foreign investment. Relatedly, foreign investment could enter in advance of anticipated tariffs—what is known as “tariff defusing" foreign investment. In this respect, it is crucial that tariff increases should fall on finished products (or final services), not on intermediary inputs for final manufactures.

Source: Mint February 07, 2021 15:11 UTC