Question

Of the non-tariff barriers described in Ch 5, which one(s) would you prefer the U.S. pursue if they are going to attempt some protectionism? Why? Which one(s) appear to be the most costly and/or disruptive?

Answer 1

Nontariff barriers (NTBs) include such heterogeneous policy tools as import quotas, voluntary export restraints (VERs), exchange controls, domestic content requirements, and many more.

• Since many of the more common NTBs, like quotas, deal directly with the quantities of goods traded rather than their prices while tariffs influence trade through prices alone, a related question is why nonprice measures of restricting trade have come to replace price measures. This is an important question for us here, since economists generally show a preference for the latter. Indeed, trade theorists are nearly unanimous in preferring tariffs to other forms of trade intervention, and it seems perverse of the world's governments that they have reduced tariffs at our urging, only to replace them with barriers we regard as more onerous.
• There can be no single answer to the question of why governments prefer NTBs. It is undoubtedly true that a variety of reasons contribute to any particular use of trade policy and that different instances of trade intervention have been motivated differently. Thus I will not attempt to make a case for any single explanation or theory of the policy process. Instead I will take an eclectic approach, discussing a variety of answers that can be found in the literature as well as a number of additional suggestions that have come to mind independently.
• Most trade intervention is used for the avowed purpose of protecting the livelihoods of workers and firms in troubled industries where import competition is seen as at least part of the trouble. Trade intervention could in principle be used to raise the wages of groups of workers, the profits of groups of firms, or, through the terms of trade, the welfare of all consumers together.

The most costly and disruptive is Import quotas.

Since rights to import under a quota are not normally auctioned off, but are simply granted outright to individuals and firms that are somehow viewed as deserving, a quota creates a tremendous incentive for competition among the potential recipients of these rights. Such competition uses real resources in an amount that may approach the value of the rents from the quota themselves, and this loss constitutes an additional cost to society that is imposed by a quota but not by a tariff. Bhagwati and Srinivasan (1980) have extended the argument to tariffs, not