A tariff is a tax imposed by a government on goods and services imported from other countries that serve to increase the price and make imports less desirable, or at least less competitive, versus domestic goods and services. … The government’s hope is that the added cost will make imported goods much less desirable.
Customs duties on merchandise imports are called tariffs. Tariffs give a price advantage to locally-produced goods over similar goods which are imported, and they raise revenues for governments. One result of the Uruguay Round was countries’ commitments to cut tariffs and to “bind” their customs duty rates to levels that are difficult to raise. The current negotiations under the Doha Agenda continue efforts in that direction in agriculture and non-agricultural market access.
Will free ports help the UK?
In August, the Conservatives said that they are planning to create up to 10 free ports across the UK after Brexit, which is something that the EU is not in favour of, because it believes that they create unfair competition.
The University of Sussex’s UK Trade Policy Observatory has made a video explaining the pros and cons of having free ports.
It argues that free ports merely “defer tariffs” on components, but because the tariffs still have to be paid on completed products, this does not offer much of a benefit when tariffs are already low, so this will not boost trade.
The academics also say that free ports will not necessarily create new jobs, as many jobs are relocated from elsewhere in the country.
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