Bravado has raised tariffs above its tariff bindings on imported goods from all countries, but has raised tariffs the most on goods imported from the USA and Europe. Although the government has used tariffs primarily as a revenue-raising measure, they are an inefficient tax. Tariffs risk distorting the Bravado's resource allocation by protecting inefficient activities producing import substitutes for the domestic market, and providing a bias against exports.
Although the Bravado's very small and narrow production base may imply that such distortions are minimal, this may not be the case, especially if those in production patterns within the manufacturing sector are taken into account. Such inefficiencies will also increase if the main manufacturing expansion is because of tariff protection. Efficient exports, such as motorcycles and sport equipment, may also be adversely affected by these tariff policies.
A relatively high tariff level that provides escalating protection may distort producer incentives in favor of processed goods for domestic consumption, and is unlikely to foster economic efficiency or exports. Even as a tax measure, lower more uniform tariffs would be also less distorting. In compliance with article I of GATT, any advantage, favor, privilege or immunity granted by any country to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other countries.
Further, each country shall accord to the commerce of the other countries treatment no less favorable than that provided. If any country considers that a product is not receiving from another country the treatment, which the first country believes to have been contemplated by a concession, it shall bring the matter directly to the attention of the other country.
If the latter agrees that the treatment contemplated was that claimed by the first country, but declares that such treatment cannot be accorded because a court or other proper authority has ruled to the effect that the product involved cannot be classified under the tariff laws of such country so as to permit the treatment contemplated in GATT, first of all US and EU together with any other countries substantially interested, shall enter promptly into further negotiations with a view to a compensatory adjustment of the matter.
Subsidies. Bravado has provided a system of payments and bounties to exporters of computers manufactured in Bravado, paying 5 Bravadan dollars for every computer exported. It is also recognized that the granting by Bravado a subsidy on the export of computers may have harmful effects for other countries, both importing and exporting, may cause undue disturbance to their normal commercial interests, and may hinder the achievement of the objectives of GATT.
In compliance with article XVI of GATT, Bravado shall cease to grant either directly or indirectly any form of subsidy on the export of any product other than a primary product which subsidy results in the sale of such product for export at a price lower than the comparable price charged for the like product to buyers in the domestic market. Bravado shall extend the scope of any such subsidization beyond that existing by the introduction of new, or the extension of existing, subsidies.
If any country grants or maintains any subsidy, including any form of income or price support, which operates directly or indirectly to increase exports of any product from, or to reduce imports of any product into, its territory, it shall notify other countries of the extent and nature of the subsidization, of the estimated effect of the subsidization on the quantity of the affected product or products imported into or exported from its territory and of the circumstances making the subsidization necessary.
In any case in which it is determined that serious prejudice to the interests of any other country is caused or threatened by any such subsidization, Bravado shall, upon request, discuss with the other country or parties concerned, or with the Countries, the possibility of limiting the subsidization. Accordingly, Bravado should seek to avoid the use of subsidies on the export of primary products.
If, however, it grants directly or indirectly any form of subsidy which operates to increase the export of any primary product from its territory, such subsidy shall not be applied in a manner which results in that country having more than an equitable share of international export trade in that product, account being taken of the shares of the countries in such trade in the product during a previous representative period, and any special factors which may have affected or may be affecting such trade in the product.
As a member of WTO, Bravado should take part in promoting the objectives of GATT and avoiding subsidization seriously prejudicial to the trade or interests of countries.