Prosperity and Depression.pdf

Chap. 12International Aspects of Business CyclesMuch of what has been said about the influenceInfluence of transport costs is equally applicable to tariffof existing barriers and other hindrances to international trade.tariffs. Customs duties in particular resemble transportcosts in that they impose an obstacle to the movementof goods; but the obstacle can be overcome if the pricedisparities in the exporting and the importing country aresufficiently high. For this reason it is convenient· to mentionthem at this point, though they may be regarded as more" artificial " than some of the other disintegrating factors treatedbelow.Whereas transport costs tend to increase the proportion ofdemand directed to goods and services produced in· nearer ormore accessible. regions, Customs tariffs-being levied at politicalfrontiers only-tend to confine demand to the products of thesame State, or to other States whose imports are rel~tively littleaffected by the tariff barriers. Often, this means that tariffs actas an additional factor tending to localise monetary expansions andcontractions. It need not be so, however, since their effect maybe to divert demand from nearer to more distant sources ofsupply.This will be the case for populations living close to politicalfrontiers and hence to Customs barriers. The effect of high tariffprotection will be that localities within the same country-or,it may be, within the same empire-may tend to have their periodsof prosperitY and depression at the same time, whereas othercountries will tend to show a lesser degree of synchronisation.Changes in tariffs have exactly the same conse..Influence quences as changes in transportation cost-inof changes which connection we may refer to the short analysisin tariffs. of. the possible expansionary influence of theimposition of a tariff in the protected countrywhich was given on page 382 above. (This type of analysis canbe easily adapted so as to apply to the effects of the removal of atariff on both countries concerned.)Tariffs differ, on the other hand, from transport costs in thefact that they can be altered by legislation, and therefore may bechanged as a matter of policy systematically throughout.the courseof a cycle. A country may conceivably succeed, by raising its