What are the differences among tariffs, quotas, and non-tariff barriers? What are the downsides of these types of trade barriers?
Tariffs, quotas and non-tariff barriers are readily observable in international trade, wherein various organizations, including government agencies may be involved at the international level. Tariffs, quotas and non-tariff barriers are measures that are intended to provide some level of control that the government can apply to imported goods. These measures, though, are considerably different and have varying benefits and disadvantages.
Tariffs are a form of tax applied as barriers on goods that are imported into the country. Tariffs are oftentimes used as a source of revenues for government funds. For example, tariff can be used to collect taxes on agricultural products. A specific example is the set of low tariffs that are implemented via the North American Free Trade Agreement, which basically made trade within North America easier by reducing the barriers to international trade within the region.
Quotas are used to establish a set a barrier or limit in the number or amount of goods imported into the country. Considering that quotas are literal and physical in nature, quotas are an effective way of restricting the amount of imported goods. For example, quotas can be imposed on the amount of fruits that can be imported into the country. A specific example of quotas is the quota imposed on imported meats. In a way, the government prevents the influx of too much meat into the country.
Non-tariff barriers are legal measures in international trade, with the aim of ensuring the achievement of a specific goal, which can be the prevention of a disease. Even though the main goal of non-tariff barriers is different from the goals of tariffs, the effects of tariffs and non-tariff barriers are considerably similar – – they help limit the flow of goods into the country, and can also serve as sources of revenues for the government. For example, non-tariff barriers can be used to minimize the entry of some industrial chemicals into the country. A specific example is the non-tariff barrier used to minimize the importation of live plants or seeds, with the aim of protecting the native species of plants in the country.
Reasons for Using Tariffs, Quotas, and Non-tariff Barriers
Tariffs, quotas, and non-tariff barriers are used because of the need to control the flow of goods into the country. Tariffs are used mainly because of their applicability in international trade, wherein foreign organizations are involved. Specifically, tariffs are used because of their considerable visibility, which means that companies can readily monitor and inspect the tariffs that are applied to goods. In addition, tariffs are used because they can serve as a source of revenues for the government. Quotas are used because they can effectively limit the amount of goods that can be imported. Non-tariff barriers are used because they can help protect the people and natural resources in the country, while serving a possible source of revenue for the government.
Downsides of Using Tariffs, Quotas, and Non-tariff Barriers
The downside of employing these types of trade barriers is that they limit the flow of good into the country, even when these goods can be of high quality and safety. An important specific downside of using tariffs, quotas and non-tariff barriers is that they can lead to higher prices, as the taxes or penalties imposed on imported goods leads to the higher prices of these goods. Thus, consumers are left with fewer options than if tariffs, quotas and non-tariff barriers were not used at all. Overall, though, tariffs, quotas and non-tariff barriers serve as effective means by which governments can control the importation of goods into their respective jurisdictions.
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- Carrère, C., & De Melo, J. (2011). Non-Tariff Measures: What Do We Know, What Might Be Done?. Journal of Economic Integration, 26(1), 169-196.
- Walter, I. (2014). Non-tariff barriers and the free-trade area option. PSL Quarterly Review, 22(88).