Rate of Effective Protection

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Rate of Effective Protection

The added value to a domestically produced good or service resulting from a tariff that keeps out (or makes more expensive) foreign goods and services. That is, because the tariff make foreign goods and services more expensive than they otherwise would be, domestic goods and services are not forced to cut their own prices, which adds value and results in higher profits.
References in periodicals archive ?
The government's historical intervention in the pricing, procurement and storage of agricultural commodities, along with the presence of import tariffs on input commodities, have resulted in negative effective rates of protection, reducing the incentive to shift towards high value-added production.
The government plans to review and reform the external tariff structure to reduce effective rates of protection while simultaneously pursuing new trade agreements.
The first was the development of the concept of 'effective rates of protection' from the early 1960s.
In a paper that had a huge impact on the analysis and measurement of protection in Australia, Max Corden (1963) introduced to Australia the concept of effective rates of protection. This concept had been developed earlier in Canada by Clarence Barber.
The Committee obtained estimates of effective rates of protection for a sample of commodities and product groups from the Tariff Board and the Committee secretariat.
The measurement of effective rates of protection changed our perception of tariff protection and industry assistance more generally.
This is what Lloyd and MacLaren call a semi-general equilibrium measure as it is the partial equilibrium measure with the addition of the effects of tariffs on inputs of producers on effective rates of protection. It has the considerable advantage that it can be calculated without a general equilibrium model.
Among other things I suggested calculation of effective rates of protection. These calculations were made primarily by Ron Gray, who was on loan to the Committee from the Department of Trade.
'The United States tariff structure: estimates of effective rates of protection of United States industries and industrial labor', Review of Economics and Statistics 48, May, pp.

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