(a) What is protective tariff?
(b) Outline any four reasons in favour of protective tariff.
(c) State any two reasons against protective tariff.
Explanation
(a) A protective tariff is an import duty imposed on certain commodities to protect domestic industries from foreign competition.
(b) Reasons for
(i) To correct balance of payments problems.
(ii) To protect domestic industries from foreign competition.
(iii) To generate for revenue.
(iv) To discourage dumping.
(v) To prevent the importation of dangerous goods.
(vi) As a political weapon.
(vii) To protect jobs/prevent unemployment.
(c) Reasons against
(i) It limits the level of variety of goods available in the country.
(ii) Other countries may also retaliate.
(iii) It may lead to increase in the price of goods especially if the tariff is too high.
(iv) Fall in the standard of living due to high taxes on imports.
(v) Over protection of domestic industries may lead to inefficiency.