nominal rate of protection

nominal rate of protection

the actual amount of PROTECTION accorded to domestic suppliers of a final product when a TARIFF is applied to a competing imported final product. For example, assume that initially the same domestic product and imported product are both priced at £100. If an AD VALOREM TAX of 10% is now applied to the imported product, its price will increase to £110. This allows domestic VALUE ADDED (and prices) to rise by up to £10 with the domestic product still remaining fully competitive with the imported product. The nominal rate of protection accorded to domestic suppliers is thus 10% of the price of the imports. Compare EFFECTIVE RATE OF PROTECTION.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005