ABSTRACT
Despite strong theoretical and empirical arguments for free trade, most countries interfere with trade flows, and import tariffs are one of the oldest known trade controls used for this purpose. Tariffs have traditionally been used to achieve multiple goals, such as protecting local industry, raising public sector revenue, correcting market distortions, improving terms of trade, redistributing income, achieving certain macroeconomic objectives (for example balanced trade) or even as an instrument of foreign policy. Efficiency of tariffs in pursuing these goals depends on which of them are targeted, as well as on specific economic circumstances. However, if a country decides to include trade controls in its policy toolkit, tariffs are to be favoured because of their transparency and relatively benign character as compared to other trade controls. Indeed, tariffs have been emphasized as a principal means of trade protection in multilateral trade negotiations under the auspices of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). At the same time these negotiations have achieved substantial cumulative reductions in tariffs.
