In this calculation, effective protection equals nominal, i.e., 10%. However, suppose imported inputs used in motorcycles were $15000. Then the effective rate of protection is 25% (=((27500-15000)/10000))-1). Perhaps even more important, suppose instead a 10% tariff is applied to the imported inputs into motorcycle.

Furthermore, what is effective rate of protection in international trade?

The concept of effective rate of protection signifies that a reduction in nominal rates of tariff on the imported raw materials needed for the domestic processing seems to be a concession for the foreign country intended to expand the volume of trade.

What is a nominal tariff?

nominal tariff rate. The rate associated with duties imposed on goods that do not reflect price changes of the goods due to inflation, taxes, etc. Also called effective tariff rate.

What is an ad valorem tariff?

The most common is an ad valorem tariff, which means that the customs duty is calculated as a percentage of the value of the product. Mixed tariffs are expressed as either a specific or an ad valorem rate, depending on which generates the most (or sometimes least) revenue.

What is a specific tariff?

An import tariff is a tax collected on imported goods. A specific tariff is levied as a fixed charge per unit of imports. For example, the US government levies a 51 cent specific tariff on every wristwatch imported into the US. Thus, if 1000 watches are imported, the US government collects $510 in tariff revenue.

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Also question is, how do you calculate nominal rate of protection?

The nominal rate of protection is the percentage tariff imposed on a product as it enters the country. For example, if a tariff of 20 percent of value is collected on clothing as it enters the country, then the nominal rate of protection is that same…

What does TRQ mean?

tariff-rate quota

What is the difference between a nominal tariff and an effective tariff?

The nominal rate of protection is the rate that is levied on a given product The effective rate of production takes into account the nominal rate and any tariffs on intermediate inputs. Consequently, it gives a clearer picture of the overall amount of protection that any given product receives.

Similarly, it is asked, what is effective tariff rate?

In economics, the effective rate of protection (ERP) is a measure of the total effect of the entire tariff structure on the value added per unit of output in each industry, when both intermediate and final goods are imported.