(2011, 02). Proton vs Perodua Case Study

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International Trade
Free, Fair and Open?

Access the complete publication at: http://dx.doi.org/10.1787/9789264060265-en Protectionism? Tariffs and
Other Barriers to Trade

Please cite this chapter as:
Love, Patrick and Ralph Lattimore (2009), “Protectionism? Tariffs and Other Barriers to Trade”, in International Trade: Free, Fair and
Open?, OECD Publishing. http://dx.doi.org/10.1787/9789264060265-5-en This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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Goods and services do not flow completely freely among countries, even among
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This is particularly true for industrial goods, on which tariffs have fallen from around 40% at the end of World War II to a tenth of that today. Nevertheless, tariffs continue to influence trade patterns.
By making products more expensive to consumers, tariffs hamper demand for imports. They also alter the relative prices of products, and can protect uncompetitive companies and their overpriced products. These distortions are particularly pronounced in many non-OECD countries where tariffs remain substantially higher than in the OECD area.
Tariffs on agricultural products are on average much higher than those on industrial products, although there is considerable diversity from country to country. Moreover, tariffs may be coupled with quotas whereby a country sets a tariff of, say, 10% on the first 10 000 units of imported grain (called the tariff rate quota, or TRQ) but increases it to 100% on any additional grain imports
(called the above quota tariff). One OECD study found that such tariffs on agriculture products were equivalent, on average, to a straight tariff of 36% for OECD countries and 63% for selected non-OECD countries, compared with agricultural tariffs of 15% in
OECD countries and 43% in non-OECD countries.
Even when tariffs have been reduced, the way they are structured continues to pose problems in both agriculture and industry.
Problems exist

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