Question

Answer the following questions completely.

Describe some of the differences between tariffs and quotas.

What are the intent and impact of domestic content requirements?

Is a tariff-rate quota a two-tier tariff? Why?

What is an OMA?

Answer 1

1. There are different ways to protect yourself. Tariffs and quotas are the most critical methods of security. A duty is an import tax. It is usually levied on the imports of a specific commodity by the government. Quota, on the other hand, is a limit of quantities. It physically restricts commodity imports. This determines the maximum amount that can be imported over a given period of time.

Quotas are tariff-like. In addition, the same diagram can represent them. The main difference is that while tariffs function by rates, quotas limit quantities. Therefore, by imports, quota is a numerical cap.

Therefore, the effect of tariffs and quotas on production, con-sumption effect and restrictive effect on imports are exactly the same. The only difference is the income region. We have already seen that tariffs increase government revenue while quotas do not generate income from governance.

All the advantages of quotas go to the manufacturers and the fortunate importers who manage to obtain the limited and expensive import licenses. Quotas vary from tariffs in such a situation. When import licenses were auctioned off to the importers, however, the government will earn revenue from the auction. Quotas and tariffs are similar under these conditions.

2. This is the same as focusing on the domestic production of goods. To American workers, this would be fine, but not so good to American consumers. It will restrict options, raise product costs, and make certain goods very scarce. Nearly all computer motherboards, for instance, are now being manufactured, mostly from China. If the US relied on domestic manufacturing of motherboards, it would make personal computers very costly and very scarce. On the other hand, creating a lot of domestic and domestic manufacturing jobs would be tremendously beneficial.

3. A tariff quota (TRQ) is a two-tiered tariff system that incorporates two traditional policy instruments for controlling imports (import quota and tariff). In effect, a TRQ regime allows the imposition of a lower tariff rate on imports of a given product in a specified quantity and requires the imposition of a higher tariff level on imports above that quantity. For example, a country can allow 5,000 tractors to be imported at a tariff rate of 10%, and any tractor imported above that amount will be subject to a tariff rate of 30%.

4. Orderly marketing arrangement. Bilateral agreement by which an exporting country (government or industry) decides to limit or restrict exports without quotas, tariffs or other import restrictions being used by the importing nation.