9.1.4

Competitiveness Policies

Test yourself

Tariffs

Tariffs are effectively an ad valorem tax on the goods and services that are imported into a nation.

Illustrative background for Pre tariffIllustrative background for Pre tariff ?? "content

Pre tariff

  • Before the tariff, the domestic suppliers produce an output of Q2.
  • The rest of the supply is imported from the rest of the world.
Illustrative background for Post tariffIllustrative background for Post tariff ?? "content

Post tariff

  • After the tariff, the amount produced domestically is Q4.
  • Tax revenues raised are worth the total of the pink box. This is equal to the change in price caused by the tariff multiplied by the number of imports.
Illustrative background for USA in 1800sIllustrative background for USA in 1800s ?? "content

USA in 1800s

  • The USA used tariffs on foreign imports in the 19th century.
  • They protected their infant industries of pig iron and steel and this helped their economy develop technologically.
Illustrative background for Improving international competitivenessIllustrative background for Improving international competitiveness ?? "content

Improving international competitiveness

  • By protecting an infant or mature industry, a nation can learn by doing.
  • Developing know how, capital and human capital in an industry, a nation can increase its productivity and international competitiveness.

Other Methods of Increasing Competitiveness - USA

The USA has increased its competitiveness through the following methods:

Illustrative background for Technological advancesIllustrative background for Technological advances ?? "content

Technological advances

  • The USA can increase its competitiveness using technological advantages.
  • The US Shale Gas industry developed new methods to extract natural gas from the ground at a very low cost.
  • This can allow the USA to exploit its natural resource endowments and export more energy to the world.
Illustrative background for Flexible labour marketIllustrative background for Flexible labour market ?? "content

Flexible labour market

  • The USA has a flexible labour market, with a low minimum wage and less red tape on hiring & firing than many other nations.
  • This flexibility can help to keep businesses’ labour costs low and make the USA more competitive.
Illustrative background for QuotasIllustrative background for Quotas ?? "content

Quotas

  • The USA has something called Tariff Rate quotas on some goods, such as Satsumas and Tuna.
  • Having quotas, can help to support domestic infant industries. - Quotas can also be used to help to protect mature industries.
  • However, nations may retaliate against quotas and tariffs.

Jump to other topics

1Introduction to Markets

2Market Failure

3The UK Macroeconomy

4The UK Economy - Policies

5Business Behaviour

6Market Structures

7A Global Perspective

8Finance & Inequality

9Examples of Global Policy

Go student ad image

Unlock your full potential with GoStudent tutoring

  • Affordable 1:1 tutoring from the comfort of your home

  • Tutors are matched to your specific learning needs

  • 30+ school subjects covered

Book a free trial lesson