3. subsidising exports is also a common practice

3. The existing levels of duties and subsidies and the extent of changes in them. 4. The response of the foreign countries.

It should be noted that moderate rates of customs duties may not always be effective enough for bringing about desired changes in imports and exports. For example, in the case of items of low demand elasticity, the rates of import duties may have to be very high. Quantitative restrictions may be necessary when an imported commodity has a prestige value for the consumers, or when it is otherwise considered by them a necessity.

Non-Use of Export Duties: Use of export duties is not popular with governments. This can be explained easily. Since most countries want to encourage their exports, widespread use of export duties is ruled out. This tool has relevance only for those items which have substantial export value and which have highly inelastic demand in foreign countries.

Governments encourage exports by various means. International agreements permit them to exempt export items from domestic taxes (such as excise duties, sales taxes, etc.); and if the same have been collected already, to refund them. In addition, subsidising exports is also a common practice with governments faced with the task of improving the balance of payments.


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