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Unit 8 : Tariff, Quotas and Non-tariff Barriers : Definitions and Types

A discriminatory tariff calls for different rates of duties depending on the country of origin or the Notes
destination of the product. For example, a country can impose higher rates of duty on goods coming
into the country from, say, Australia and lower rates of duty on goods coming from Thailand. A non-
discriminatory tariff, on the other hand, imposes a uniform rate of duty regardless of their source of
origin. Tariffs are said to be single column when they are non-discriminatory, and double column when
they are discriminatory.
Revenue tariffs are those which are imposed primarily to produce revenue for the government. With
the introduction and expansion of income taxes and other direct taxes, the importance of tariffs as a
source of revenue has considerably gone down, especially in developed countries. The less developed
countries, however, still rely on tariffs as a substantial source of government revenues. In Malaysia,
for example, the import and export duties together amount for well over 40 per cent of the total
government revenues. In commercial policy, it is the protective tariffs that dominates the scene. When
the tariffs are imposed primarily to protect the domestic industries from foreign competition, the
country is said to have protective tariffs. The motive, here, is not revenue but protection of the domestic
economy from foreign competition.
It is not possible to classify revenue tariffs and protective tariffs and put them into watertight
compartments, because tariffs imposed for revenue will produce some protective effects and the
protective tariffs yield some revenue as well. The difference between the two is basically with regard
to their primary motive as such.
Finally, there are retaliatory tariffs and countervailing tariffs. When Country A imposes (or increases)
duties against the products from Country B, it is possible that country B will retaliate and levy duties
on goods imported from Country A. Country B’s tariffs are then described as retaliatory tariffs. Their
motive is neither to raise revenue nor to accord protection to domestic industries, but to act in
retaliation. Tariffs are said to be countervailing when a country imposes (or increases) import duties
with a view to offset export subsidy in the country of origin. For example, if Country B, the government
of country B may think that country A is subsidizing its export to Country B, the government of
country B may think that country A’s products entering into Country B are enjoying “unfair advantage”
over the country’s domestic import replacement products, then Country B is justified in imposing
countervailing duties on the products imported from Country A. The countervailing duties are
primarily aimed at offsetting such an unfair advantage given by export subsidies in foreign countries.
Import duties have received most of the analytical and policy attention and they are far more
widespread than the export duties. In some countries like the United States, export duties are prohibited
by law. In other countries where export duties are in vogue, their sole aim appears to be revenue
collection. Import duties, however, are motivated by two other considerations, besides revenue viz.
considerations of protection and balance of payments adjustment. In what follows, therefore, we will
concentrate our tariff study only with reference to the import tariffs.
8.3 Quotas

A quota is simply a maximum limitation, specified in either value or physical units, on imports of a
product for a given period. It is enforced through licenses issued to either importers or exporters and
may be applied to imports from specific countries or from all foreign countries generally. Two examples
illustrate these different characteristics. The United States imposes a general quota on dried milk
imports; licenses are granted to certain U.S. trading companies, who are allowed to import a maximum
quantity of dried milk based on their previous imports. In a different situation U.S. sugar imports are
limited by a quota that specifies the shares of individual countries; the right to sell sugar to the
United States is given directly to the governments of these countries.
Import Quotas

A quota is a direct limitation of the physical quantity of exports and imports permitted in the country.
We will only discuss import quotas as they are more common than the export quotas. The effects of
quotas are similar to those of tariffs, but there are also substantive differences between the two which
are worth examining.

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