August 1, 2013

Smuggling Price Gap Effect

The price gap among competing products that was widened by smuggling has negatively affected many economies. Imagine a product that is produced locally competing against a smuggled good; unfair competition will be the picture. Relatively, the cost of local production is higher compared to other countries (like China); then, add the factor that smuggled good does not pay import tax (tariff).

Because of illegal advantage of smuggling, the price of the smuggled good would be lower than the local produced good. As the price gap increase, local producers would be forced to stop their operations; thus, would result to additional unemployment.

Smuggling kills healthy market competition and eventually transforms to a greater economic problem. Responsible agencies cannot let the bleeding continue while the economy is looking for investment donors.

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