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Instruments of Commercial Policy

A number of commercial policy instruments are used. These include:

(i) Tariffs:
These are taxes imposed on imported goods and services e.g. import duties are imposed to reduce importation of certain categories of goods to reduce their consumption.

(ii) Import Quota:
This involves fixing a physical limit on the amount of a good or service that can be imported.

(iii) Import Licensing:
Importers are required by law to obtain licenses for the importation of particular commodities.

(iv) Foreign Exchange Control:
This is a policy where foreign currencies cannot be bought without the permission of the Central Bank of the country concerned, and there is always a limit to the amount that may be purchased.

(v) Devaluation:
This is a commercial policy which involves the reduction in the official price of a currency by government action.

(vi) Prohibitions:
This is outright ban imposed on commodities by government.

(vii) Administrative Controls:
These are severe rules and regulations imposed by government in order to make importation difficult.

(viii) Import-Substitution:
This is a policy aimed at promoting the production of commodities at home which would otherwise be imported. This will enable a country to be industrialised.