Preferential Tariff and Trade Liberalization

A preferential tariff is a reduction or elimination of custom duty levied on imported goods from countries with which it has a free trade agreement. Preferential tariffs benefit importer countries by making imported goods more affordable to the population. They are also beneficial to the exporter country as the trade agreement will encourage consumers in the importer country, to continue purchasing their products. Preferential tariffs however, also protect the economy of the exporter country. The exporter has a guaranteed market despite the quality of their goods since similar products from other countries would attract higher tariffs.

Trade liberalization refers to the reduction of government intervention in trade through tariffs, quotas and other regulations which hinder the free flow of goods and services between two countries. Policies that promote trade liberalization are needed for sustained economic growth and poverty reduction.

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