Why the tariffs are critical for Iraq's development, security, and independence

[Carrello]

If you choose the read this, thank you. I thought individuals might get a better understanding of why the tariffs are critical for Iraq, if they do not have a pretty good understanding already, and obviously except for the Investopedia info, all of this is JMHO.

As we wait to see the fate of the implementation of the Iraqi tariffs this weekend, I am reading Dinarland members comments regarding the need to postpone the tariffs, and I would agree on the premise of most of them: the poor do not need a tax they cannot afford. Yes, most assuredly, but why can they not afford the tax? Why can they barely afford food, shelter, and clothing? Because they do not have jobs. Unemployment hovers around 30%. They don't have jobs because industries have not been developed within Iraq except for oil, which is burgeoning, but only benefits a few. Loans have not been available until recently for small businesses to further development. The government has embezzled and squandered money allocated for agriculture, transportation, water projects, and energy, and poverty is one of the results.

Tariffs provide protection for goods produced within a country and tariff schedules are written to apply different tariffs levels to the goods imported according to the the viability, resources available, and need for a commodity to be produced within a country to avoid high importing prices, i.e., there was a 40% tariff on dates. Why so high? Because Iraq was at one time the largest date producer in the world and the industry needs to be redeveloped in order to build employment, and in turn, the country. A high tariff makes the imported dates too expensive, so the commodity ends up being seen as a good business and developed within Iraq. More business, more jobs and if the business is really good, they can export the product.

I would think that the goods that are currently being imported to Iraq have a price that is fairly high. If the Iraqis want dates and Iran can supply dates, the price is up to the Iranians to apply. Supply and demand, and the lack of competition within Iraq, makes for a wicked scenario. The monies collected from tariffs are going (supposedly) towards agencies that will monitor not only goods entering the country, but agencies to improve people's lives; clean air, clean water, etc,

Do you think Iran and Maliki would be able to man handle Iraq and have influence the way they do, if the Iraqi people were a financially set, if they were not hungry and hot, just a few of the basics of oppression. The development of Iraq, therefore tariffs, are a security issue, as with any Middle Eastern country, or any country for that matter.

If we think of tariffs as just being a tax and inflicting further misery on the poor, we do not see the whole picture, which is actually the path to a bountiful country that can stand on its own. Hence, the World Trade Organization's requirement for tariffs for ascension to full membership. "The WTO provides a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all, thus contributing to economic growth and development." This is why tariffs are required for WTO full membership.

This information is from www.investopedia.com on the basics on tariffs:

What Is a Tariff?

In simplest terms, a tariff is a tax. It adds to the cost of imported goods and is one of several trade policies that a country can enact.

Why Are Tariffs and Trade Barriers Used?

Tariffs are often created to protect infant industries and developing economies, but are also used by more advanced economies with developed industries. Here are five of the top reasons tariffs are used:

1.Protecting Domestic Employment

The levying of tariffs is often highly politicized. The possibility of increased competition from imported goods can threaten domestic industries. These domestic companies may fire workers or shift production abroad to cut costs, which means higher unemployment and a less happy electorate. The unemployment argument often shifts to domestic industries complaining about cheap foreign labor, and how poor working conditions and lack of regulation allow foreign companies to produce goods more cheaply. In economics, however, countries will continue to produce goods until they no longer have a comparative advantage (not to be confused with an absolute advantage).

2.Protecting Consumers

A government may levy a tariff on products that it feels could endanger its population. For example, South Korea may place a tariff on imported beef from the United States if it thinks that the goods could be tainted with disease.

3.Infant Industries

The use of tariffs to protect infant industries can be seen by the Import Substitution Industrialization (ISI) strategy employed by many developing nations. The government of a developing economy will levy tariffs on imported goods in industries in which it wants to foster growth. This increases the prices of imported goods and creates a domestic market for domestically produced goods, while protecting those industries from being forced out by more competitive pricing. It decreases unemployment and allows developing countries to shift from agricultural products to finished goods.

Criticisms of this sort of protectionist strategy revolve around the cost of subsidizing the development of infant industries. If an industry develops without competition, it could wind up producing lower quality goods, and the subsidies required to keep the state-backed industry afloat could sap economic growth.

4.National Security

Barriers are also employed by developed countries to protect certain industries that are deemed strategically important, such as those supporting national security. Defense industries are often viewed as vital to state interests, and often enjoy significant levels of protection. For example, while both Western Europe and the United States are industrialized, both are very protective of defense-oriented companies.

5.Retaliation

Countries may also set tariffs as a retaliation technique if they think that a trading partner has not played by the rules. For example, if France believes that the United States has allowed its wine producers to call its domestically produced sparkling wines "Champagne" (a name specific to the Champagne region of France) for too long, it may levy a tariff on imported meat from the United States. If the U.S. agrees to crack down on the improper labeling, France is likely to stop its retaliation. Retaliation can also be employed if a trading partner goes against the government's foreign policy objectives.

Read more: http://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp#ixzz1zCAcf4Zd

[Maggie123]

You Hit The Nail On The Head And Drove It Home!

[jg167]

Yep. The idea that if tariffs are in place then the dinar must be RV'd such that Iraqis can pay them, misses the whole point of tariffs which is that they are expected to be avoided thus helping domestic suppliers. If Iraqis had so much wealth that they did not care about paying tariffs, the tariffs would serve no purpose.

[Captjohn]

Imposing taxes on the poor citizens that can not afford them is not a novel idea.....we just did that here in the U.S. with a huge bevy of new taxes disguised as healthcare. Welcome to democracy Iraq. Nice post anyway.

[jg167]

Imposing taxes on the poor citizens that can not afford them is not a novel idea.....we just did that here in the U.S. with a huge bevy of new taxes disguised as healthcare. Welcome to democracy Iraq. Nice post anyway.

If you read the post then you should understand that the whole point of tariffs is for them to NOT be paid by encouraging people to buy domestic products instead of imported ones.

As far as healthcare goes, it is a service that can NOT be provided cost effectively by the private sector since it does not follow the usual supply/demand cost curves of other products and services. The last 50 years of healthcare in this country and the rest of the world overwhelmingly prove this. Its frustrating and annoying since of course we'd like the government to do as little as possible. But, if we want everyone to get decent health care for a reasonable cost (and hence stay healthier which is the big key to keeping costs down), the government has to be the primary player. There just isn't any other way to make it work (at least that any country on the planet has discovered).

[Carrello]

Touche' jp167!

[SWFloridaGuy]

Thanks for taking the time to lay that out for us Carrello. Very informative.

[Carrello]

You're welcome SWFG. I am glad to see it got some place at other pubs, cause it fell flat here.