Is the fact that applied tariffs are lower than bound levels costing the country?
The M&G article speaks of the difference between applied and bound duties, often referred to as the ‘water’ in a tariff, as reflecting a “cost” to South Africa. This is simply not the case. Increasing duties would indeed result in a modest increase in government revenue, provided these duties did not result in lower volumes of imports (something which is quite possible). Nevertheless, this would merely reflect the fact that South African consumers would have to pay more for their imported goods. The increase in tariffs would represent a transfer from consumers to government, in other words, it would act as another form of consumption tax. Raising tariffs would also result in a number of indirect costs to the South African economy. These could include lower profit margins for retailers, a drop in demand for all goods following the loss of spending power that results from an increase in the prices of imports, higher input costs for firms who use imported goods as inputs in their producti
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