Tariff escalation
Topic: International Trade Policy, WTO and Intellectual Property · NCERT: Beyond NCERT
Meaning
Tariff escalation means tariffs are low on raw materials and get higher on semi-processed and finished goods. This protects processing industries in the importing country. It also discourages value addition, meaning processing raw materials into higher-value goods, in exporting countries. Poor countries can end up stuck selling cheap raw commodities.
Example
Raw cocoa may face a 0% tariff, cocoa paste 10% and chocolate 30%. A cocoa-growing country finds it easy to sell beans but hard to sell chocolate.
Don't confuse with
- Tariff peak: this is one unusually high tariff (typically above 15%) on a sensitive product. Tariff escalation is a pattern in which duties rise with each stage of processing.
Related concepts
- Tariff
- Ad valorem tariff
- Specific tariff
- Compound tariff
- Mixed tariff
- Export duties
- Duty drawback
- Tariff peak
- Effective rate of protection
- Bound tariff rate