Protectionism in Saudi

Saudi Arabia currently has a vast variety of tariffs (or duties) implemented on many different types of agricultural and industrial products. I however looked more specifically into the tariffs implemented on specific dates and flour. According to "export.gov", there is a 40 percent import tariff rate that is applied to fresh, dried/processed dates and 25 percent on wheat flour. This means that the Saudi government charges other foreign producers a certain percent of their retail price for the said product upon entry into their country. This is a tactic used by the Saudi government in order to protect domestic producers from larger foreign producers as well as to generate more income for the government, thus creating more opportunities for further investment in their infrastructure/economy. 

The theoretical results of these tariffs shown on the graph are as follows: The domestic producers of flour and wheat are the biggest beneficiaries of these tariffs as it makes it more expensive for the foreign producers to export their products into Saudi Arabis thus limiting the number of foreign products in the country and resulting in their income increasing to g+b+a+c+h from just g. The domestic consumers of the product will end up not having to pay higher prices and instead will enjoy relatively lower prices as the foreign producers have to raise prices in order to combat the high tariff rates. The government is another large beneficiary to these tariffs as the foreign producers pay the tariff rates to the government directly, meaning that the government enjoys the tariff income of d+e. These tariffs could affect the world efficiency of these products as they raise prices and reduce the availability of specific goods. Lastly, further research shows that Saudi Arabia has placed these two tariffs on dates and wheat due to their reintroduction of domestic wheat production as well as the fact that agricultural exports in Saudi Arabia are largely based on dates. 


https://www.trade.gov/import-tariffs-fees-overview-and-resources 

https://www.export.gov/apex/article2?id=Saudi-Arabia-import-tariffs

https://www.world-grain.com/articles/13420-focus-on-saudi-arabia 

Comments

  1. Dr. Q January 2, 2022 at 4:23 PM

    I agree with everything except that domestic consumers will in fact have to pay higher prices, as the equilibrium price will be Pw+t. Also, world efficiency suffers because some inefficient domestic producers will be protected by the tariff.

    ReplyDelete

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