What is a Tariff?

A tariff is essentially a tax. It raises the price of an imported good, making it more
expensive than similar domestic goods. The idea is to increase demand for domestic
products while reducing the volume of imports. Tariffs also provide a source of revenue
for the country levying them.

Why is used?
Tariffs are used to restrict imports by increasing the price of goods and services purchased
from another country, making them less attractive to domestic consumers.

Governments impose tariffs to raise revenue, protect domestic industries, or exert

political leverage over another country.

Tariffs have also been used as diplomatic weapons to punish nations. A government may
levy a tariff simply to harm the trade another country depends upon. These crippling
tariffs can destroy nascent industries and force economically weak nations to make
concessions in unrelated negotiations.

What are the benefits?

A tariff levied to protect a local industry. In fact, this is the most often cited reason for
levying a tariff. It is a means for ensuring that local providers maintain if not a monopoly
then at least a profitable advantage over non-local producers of goods. Historically great
empires used tariffs to control the flow of goods between colonies and mother countries,
and to restrict trade with rival nations. Goods that had to be shipped across the sea were
already expensive but tariffs made them even more so.

A tariff increases the price of the imported good, sometimes elevating its status to that of
a luxury good. Hence, a tariff could be imposed upon certain imports to ensure that only
a few people have an adequate supply for those imports. The more expensive an imported
good becomes, the fewer people who can afford to buy it. A tariff thus may be used to
create or maintain the status of a luxury good.

By the same token, a tariff may be used to increase the price of an exported good.
Although you don’t hear about export tariffs very often, they have been used to protect
valuable resources. Nations that want to preserve rare artifacts or natural resources may
tax their export to discourage both speculative exportation and foreign consumption.

What are the disadvantages?

One of the major disadvantages of tariffs is that they raise the price of imports, leading to
a decrease in consumer surplus. Tariffs discourage competition, leading to decreases in
product quality. In addition, high tariffs may lead to trade wars between nations.

Governments may levy tariffs on imported goods that compete with established native
industries to protect jobs and investments. These defensive tariffs, when used in
moderation, preserve aging economic systems against both foreign competition and the
need to modernize. Most economists argue that protective tariffs stifle innovation and
cripple production. After all, as the rest of the world develops new ways to make a shirt,
any tariff-protected industry that continues to make shirts the old fashioned way will not
increase production as efficiently or cost-effectively as the rest of the world.

Import tariffs hurt consumers who want to buy goods made in other countries. The
consumers may want to save money over locally produced goods, or they may perceive
a degree of quality that is missing in locally produced goods. Arguments about the quality
of goods are often used to justify import tariffs, too. An industry that determines its high
standards of production are being ignored by a rival industry in another country may
legitimately want to protect consumers from low-quality imports (while at the same time
preserving their own jobs and profits). However, in a free trade system market pressures
tend to even out quality in production as consumers learn to avoid the worst-made goods.
Tariffs may make local industries less efficient due to reduced global competition.
They may also lead to trade wars as exporting countries counter with their own tariffs on
imported products. When trading counterparts reciprocate with their own tariffs, it raises
the cost of doing business for exporters. This situation may also compromise the quality
of goods and services as industries look for ways to cut production costs.

Active trade agreements signed by Ecuador, how many? Nation with?

Ecuador is a member of the Andean Community (CAN), Latin American Integration

Association (ALADI), and the WTO. As a member of the CAN, Ecuador is party to
commercial agreements with Mercosur (Brazil, Argentina, Paraguay, and Uruguay).
Ecuador also has a bilateral trade agreement with Chile, a partial trade agreement with
Guatemala, and a commercial cooperation agreement with Venezuela.

Ecuador concluded negotiations with the European Union for a new trade agreement
that will likely come into full effect in late 2016 or early 2017. Ecuador is also currently
negotiating a trade agreement with South Korea.

TAKE BY COMERCIO EXTERIOR.COM

What tariffs are applied in these trade agreements ( per sector: primary,
secondary, tertiary, etc-what products?

Acuerdo de Cartagena (Comunidad Andina)

Tarifft
Otorgado por Ec 100%
Otorgado por Merc 100%

Products
Transporte
Transito Aduanero
Sanidad,inocuidad

Normas Tecnicas
Propiedad Intelecual

Acuerdo de Alcance Parcial de Renegociación con México

Tarifft
Otorgado por Ec 2,8%
Otorgado por Mex 3,4 %

Products

Acuerdo de Alcance Parcial de Complementación Económica con Cuba

Tarifft
Otorgado por Ec 1,3%
Otorgado por Mex 2,0%

Acuerdo de Alcance Parcial de Complementación Económica CAN-MERCOSUR

Tarifft
Otorgado por Ec 99,1 %
Otorgado por Mex 99,0%

Acuerdo de Alcance Parcial de Complementación Económica con Chile

Tarifft
Otorgado por Ec 97,1 %
Otorgado por Mex 97,1%

Acuerdo de Alcance Parcial de Complementación Económica Ecuador con

Guatemala

Tarifft
Otorgado por Ec 9,4 %
Otorgado por Mex 11,1%

Acuerdo Comercial Ecuador – Unión Europea

The agreement ensures the immediate liberalization of 99.7% of the historical

exportable supply of Ecuador in agricultural products and 100% of Ecuadorian
industrial products.