Restrictions on imports generally take two forms: tariffs and quantitative restrictions.
Tariffs are taxes on imported goods upon their entry into a country.
Tariffs, or import taxes, are usually calculated as a percentage of the value of a given imported product. If the United States imposes a 10 percent tariff on imports of Danish ham, for example, then a merchant bringing a $100 shipment of Danish ham into the United States would be required to pay 10 percent of $100, or $10, to the U.S. government.
Tariffs restrict or discourage imports by making imported goods more expensive than domestic goods. If a company importing $100 in Danish hams into the United States must pay a $10 tariff at the U.S. border, that company will be likely to increase the price of those hams in the United States, to make up for the cost of the tariff. Consumers can be expected to consume fewer Danish hams if they cost more than domestic hams, even if the Danish hams are thought to be superior in quality to the domestic hams.
Tariffs vary widely from country to country and from product to product within countries. Most countries impose no tariffs at all on some imports, but most imports are subject to at least minimal tariffs. Most U.S. tariffs are very low—less than 3.5 percent, on average (Morici, 1992).
Quantitative restrictions seek to limit access to imports by making them scarce, which, according to the laws of supply and demand, makes them more expensive. Most countries in the world apply quotas to the import of certain goods and services (although applying tariffs is much more common).
Why would governments want to alter the natural flow of international trade by imposing tariffs and quotas? Governments restrict imports for four basic reasons:
- For some governments, particularly in the developing world, tariffs provide a significant source of government revenues.
- Every country in the world, including the United States, maintains high tariffs on at least a handful of products for which domestic producers are thought to be vulnerable to foreign competition. This so-called tariff protection is typically imposed early in an industry’s life or at moments of weakness or decline, when the threat from more efficient foreign producers is thought to be particularly severe. Once imposed, tariff protection is very difficult to remove, because the enterprises and workers who benefit from it work hard to keep it in place.
- Governments use import restrictions to protect domestic health or safety. A government sometimes bans all imports of a particular good when it has reason to believe it could harm public safety or health. For example, in March 2001, the United States prohibited all European imports of livestock to protect U.S. livestock herds from foot and mouth disease, which had afflicted large numbers of animals in Europe.
- Governments also restrict imports and exports for political reasons. This kind of governmental restriction on trade is called a sanction.Countries wishing to punish or influence the behavior of another country for human rights violations or for an act of aggression, for example, will sometimes restrict imports from “misbehaving” country. In times of war, adversaries will often prohibit all imports from each other, a measure known as an embargo.
During and since the Cold War, the United States and its allies have maintained restrictions on the export of weapons, military technology, and civilian technologies with potential military uses to Communist countries and countries suspected of developing weapons of mass destruction. The figure below lists the countries against which the United States currently maintains the most restrictive trade sanctions and the reasons for those sanctions.
U.S. Trade Sanctions
|Country||Year first imposed||Reason for sanctions||Sanctions active|
|North Korea||1950||Hostile actions during the Cold War||Yes|
|Cuba||1963||Hostile actions of the Cuban government during the Cold War||Yes, but relaxed in 2000|
|1986||Libya’s repeated use of terrorism against the United States, other countries, and innocent persons, such as the terrorist attacks against the Rome and Vienna airports in 1985||No. Lifted April 2004|
|Iran||1984||Iran’s support for international terrorism and its aggressive actions against non-belligerent shipping in the Persian Gulf||Yes|
|Iraq||1990||Iraq’s invasion of Kuwait, which started the Gulf War||No. Lifted May 2003|
|Balkans||2001||Blocking property of those seeking to undermine international stabilization efforts in the Western Balkans||Yes|
|Zimbabwe||200310||Targeted sanction against those trying to undermine Zimbabwe’s democracy||Yes|
|Sudan||2006||Human rights violations in Darfur||Yes|
|Belarus||2006||Blocking property of persons trying to undermine democratic processes or institutions||Yes|
|Cote D’Ivoire||2006||Human rights violations against civilians during ongoing political crisis and civil unrest||Yes|
|Syria||2006||Assassination of the former Prime Minister of Lebanon, Rafik Hariri and consequent report pointing to Syrian and Lebanese involvement||Yes|
|Democratic Republic of Congo||2006||Widespread violence and atrocities, including targeting of children in armed conflict and sexual violence||Yes|
|Burma/Myannmar||2007||Burma’s continued repression of the democratic opposition||Yes|
|Former Liberian Regime of Charles Taylor||2007||Targeted sanctions against the regime of former President Charles Taylor||Yes, but relaxed in 2003 and 2006 to allow some diamonds, and timber products|
For each of the countries subject to U.S. sanctions, there are a few products for which trade is permitted. These products usually include informational material, such as publications, and goods intended to relieve human suffering, such as food and medicine. In addition, goods valued under $100 can usually be sent as a gift or brought to the United States by authorized travelers. The Office of Foreign Assets Control in the Department of the Treasury is in charge of administering and enforcing U.S. sanctions against targeted foreign countries.
Questions for Discussion:
What are three different reasons why a government would decide to impose tariffs?
- What are the differences among tariffs, embargoes, quotas, and sanctions? What are the different political motivations for using each? What are the economic ramifications for the home and target countries of using each tactic?
- Do you think sanctions are an effective foreign policy tool for the purposes of changing the target state’s behavior?
Next: Export Subsidies