Ad valorem is a Latin word meaning “according to value”. A 100% ad valorem tariff on imports means that the government charges 100% on the assessed value of an imported item. If the assessed value of the item goes down then the cost of the tariff goes down; the tariff goes up if the assessed value of the item goes up. This tariff does not charge on the actual cost of the item but on the assessed value. The response from our firm depends on how large a share of the manufacturing industry it holds in Thailand, the moral stance of the firm, the efficiency of the research and development department, and the firm’s policy and ability to train or re-train workers.
The United Nations Industrial Development Organization reported on Thailand in 2002. That report highlighted since 1998 the Thailand government started an Industrial Restructuring Plan (IRP) to pull Thailand out of its economic crisis. Focus of the plan included upgrading technologies; greater productive efficiency; a better-trained workforce that could match the technological development; and to develop stronger internal linkages and strategic alliances with external partners. If our firm has a fairly large share of the manufacturing industry in Thailand then we are in a position to try lobbying with the Thai government in an attempt to have them change their policy on international trade with the US, which restricts imports from the US. Since, according to the UN report, their government identified external partnership as part of their IRP our firm may refer to that and explain that it is highly probable that not only our firm, but other US firms and other external firms would move their businesses to other third world countries where they would continue to make the same profit while Thailand’s economy would suffer tremendously.
While our firm may be trying to maximize profits by manufacturing in