Taking a Look at Free Trade

775 WordsFeb 18, 20183 Pages
Free trade is something that WTO encourages globally and insists that no government interference should take place in international trade and that this will be followed by specialisation and an increase in countries welfare. Countries however want a competitive advantage and to obtain this interference takes place in the form of restrictions. Most highly competitive countries are well-off economically, has respectable infrastructure, high levels of education and technology, steady political and social status and strong international positioning. Restrictions are set in motion for several reasons, all of them follow. First we distinguish between tariff barrier restrictions and non-tariff barrier restrictions. Tariffs are imposed on either exports or imports and include a payment, like taxes that the government imposes on goods that leaves or enters the country. Import tariffs are more common than export tariffs. Ad valorum is a type of tariff which entails that you pay a fixed % on goods. For example, if you import R1200 of merchandise, and the ad valorum is set at 12%, you have to pay R144 duties on the goods. Another tariff is a specific rate tariff which means a specific amount for each unit is expected to be paid. For example if the amount is set at R200 specific rate for every tv imported to SA, every unit that is imported has to pay R200. A compound rate is the last tariff type restriction, and combines ad valorum and specifics tariffs which mean you have to pay a set
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