Question

What are 2 reasons for using quotas over tariffs?  Explain 3 types of tariffs (nominal tariff, effective tariff rate, tariff-rate quota).   Explain.

Answer 1

A quota is a government-imposed trade restriction that limits the number or monetary value of goods that a country can import or export during a particular period.

Reasons of quota

1)Countries use quotas in international trade to help regulate the volume of trade between them and other countries.

2)Countries sometimes impose them on specific products to reduce imports and increase domestic production.

3) Used as protective measures to try to control trade between countries.

4) To raise the overall cost to the producer or supplier seeking to sell products within a country.

Tariff-rate quotas allow a country to import a certain quantity of a particular good at a reduced duty rate. Once the tariff-rate quota is met, all subsequently imported goods are charged at a higher rate.

nominal tariff rate. The rate associated with duties imposed on goods that do not reflect price changes of the goods due to inflation, taxes, etc. Also called effective tariff rate.