Preferential Tariff

an especially advantageous import tax established by a given state for all or some goods of certain countries and not applied to the goods of other countries.

The imperialist powers use preferential tariffs primarily to obtain cheap raw material and foodstuffs from dependent and developing countries. Preferential tariffs were the rule in trade between a metropolis and its colonies. Great Britain made extensive use of preferential tariffs in its trade with the countries of the sterling zone. Since World War II the United States, France, Belgium, and the Netherlands have used preferential tariffs. For example, virtually all primary goods imported into the United States from the countries of Latin America and from the Philippines are so taxed and in many cases are imported duty-free. This gives the United States grounds for seeking a reduction in prices for raw material and food imported from these countries and to dictate the prices at which the United States exports its goods.

The political interests of the importing countries are important in establishing preferential tariffs. For example, before the people’s revolution in Cuba in 1959, the United States used preferential tariffs in trade with Cuba. However, the socialist transformation in Cuba led, in October 1962, to Cuba’s being officially deprived of customs preferences and entered on the list of countries that did not enjoy most-favored-nation status in the United States. The customs privileges and preferential tariffs of the African countries that are associated with the Common Market enable Western European monopolies to cut prices on raw materials exported by the African countries and to raise prices on industrial goods exported by the Western European monopolies. According to figures from the UN Economic Commission for Africa, the African countries had suffered a loss of $7 billion by 1970 as the result of unequal conditions of trade with the European Economic Community.

Cartel duties are a variation on preferential duties. They are established by agreements and treaties among a number of countries that have enterprises or associations belonging to an international cartel and producing and selling output from a particular industrial sector. For example, cartel duties on aluminum were employed until World War II by Canada, France, Germany and other countries that belonged to the international aluminum cartel. The rates of cartel duties are established at lower levels than general rates, either by a percentage discount from the general rate or by freezing the existing rate for the life of an international customs agreement or treaty. The basic purpose of cartel duties is to facilitate division of sales markets in order to obtain monopoly profits and to expand foreign trade. Cartel duties have become increasingly common in the 1960’s and 1970’s in connection with the enormous concentration of economic power and of the production and marketing of certain types of output in the hands of the international monopolies.

The socialist countries use preferential tariffs in trade with the developing, countries of Asia, Africa, and Latin America, in order to give these countries unselfish assistance. In order to achieve a further expansion of trade with the developing countries, the USSR abolished, on Jan. 1, 1965, customs duties on goods originating in and imported from the developing countries of Asia, Africa, and Latin America. The Soviet-Indonesian trade agreement of March 1974 stipulates that the parties will give one another most-favored-nation status in all trade matters.