Effective Rate of Protection

Effective Rate Of Protection

Summary of Effective Rate Of Protection

The net protection afforded by a nation's tariff system to any given domestic product. For example, the higher the rate of duty, the greater the protection against foreign imports; conversely, as rates are increased on raw materials or production inputs, the costs of domestic production are increased, thereby reducing the competitiveness of domestic manufacturers.

The effective rate of protection is calculated by deriving the difference between the duties that would be imposed on a given import and the aggregate of the duties that would be imposed on the raw materials required to manufacture locally the same product.

(Main Author: William J. Miller)

Effective Rate of Protection and International Trade Economy

In relation to international trade economy, Christopher Mark (1993) provided the following definition of Effective Rate of Protection: The overall effect of a nation's tariff system on a specific domestic product, after taking into account the impact of trade restrictions on the industry's inputs. The effective rate of protection is the proportionate increase in value- added in an industry that is possible as a result of the whole structure of protection, on both the output and the inputs of the industry.

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