What is an Export Tariff?
An export tariff is a tax placed on a good that is exported from a country. Governments use tariffs to create economic barriers to trade. Tariffs raise the overall prices of goods, limiting their production and sale. An export tariff specifically increases the cost to sell domestic goods overseas. Because they are perceived to hurt domestic business, export tariffs tend to be quite unpopular.
A government economist would most likely use an export tariff if the country were facing widespread inflation. In some cases, export tariffs are used to ensure that a country maintains enough of an important good. For example, in the past, China has placed export tariffs on many major grain products. High international grain prices caused many producers of these grain products to export their goods. This caused a domestic shortage of grain products, so the government placed an export tariff to stabilize domestic demand.
An export tariff is one method of protectionism, an economic policy in which a government restricts trade to protect its own industries and people. Typically, governments prefer to use import tariffs as methods of economic protection, as they raise the price for foreign companies to import their goods. Export tariffs, on the other hand, raise the price for domestic companies to export their goods. Most see export tariffs as harmful to the domestic economy. In countries with floating exchange rates, however, both types of tariffs have the same effect.
The idea of protectionism goes against the principles of free trade. Many economists argue that this is a bad thing, as free trade tends to create many more jobs than it destroys. Protectionism, however, ensures that, in the short term, many domestic jobs are preserved. It also ensures that industries vital for military and infrastructure use are able to stay in business. In a global free-trade economy, economists say, tariffs would be unnecessary as nations would be able to specialize in specific industries and would have no need to protect other industries.
Though export tariffs can be powerful tools, they are seldom used. An export tariff can be most effectively utilized to slow or stop inflation or to protect domestic supplies of goods. Many people are against the use of export tariffs, though, because they increase the cost of doing business for domestic companies. Because they are seldom used, they are usually given little or no attention in introductory economics classes. Even advanced economics courses tend to spend little time on the subject of the export tariff.
Do export tariffs cause a monopoly?
@winslo2004 - Not to mention, this kind of tariff could be political suicide for those who back its implementation. I have not met too many politicians who are not concerned with staying in office, and killing the export sales of your major domestic companies, which have thousands of employees each whose livelihoods depend on those sales, does not seem like a very good strategy to win votes.
@ KLR650 - I agree with you. Especially in a country that already has a large trade deficit, you need all the export companies you can get. The more things you sell overseas, the more balanced your trade is and the less you are dependent on other countries.
I can see why this kind of tariff is seldom used. It makes little sense to kill your own domestic businesses, unless there is some kind of really specific reason to do so.
I understand why a protective tariff would be put on things coming into the country, to guard against foreign products competing with those made domestically, but why would anyone want to stop their own companies from selling things?
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