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Pavitar Parkash Singh, Lovely Professional University Unit 8 : Tariff, Quotas and Non-tariff Barriers : Definitions and Types

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

CONTENTS
Objectives
Introduction
8.1 Definition
8.2 Types of Tariffs
8.3 Quotas

8.4 Non-Tariff Barriers
8.5 Summary
8.6 Key-Words
8.7 Review Questions
8.8 Further Readings

Objectives

After reading this Unit students will be able to:
• Discuss the Definition and Types of Tariff and Non-tariff.
• Explain the Types of Quotas.
Introduction

A tax imposed on imported goods and services. Tariffs are used to restrict trade, as they increase the
price of imported goods and services, making them more expensive to consumers. They are one of
several tools available to shape trade policy. Governments may impose tariffs to raise revenue or to
protect domestic industries from foreign competition, since consumers will generally purchase cheaper
foreign produced goods. Tariffs can lead to less efficient domestic industries, and can lead to trade
wars as exporting countries reciprocate with their own tariffs on imported goods. Organizations
such as the WTO exist to combat the use of egregious tariffs.
Non-tariff barriers are another way for an economy to control the amount of trade that it conducts
with another economy, either for selfish or altruistic purposes. Any barrier to trade will create an
economic loss, as it does not allow markets to function properly. The lost revenues resulting from the
barrier to trade can be called an economic loss.
Quota, in international trade, government-imposed limit on the quantity, or in exceptional cases the
value, of the goods or services that may be exported or imported over a specified period of time.
Quotas are more effective in restricting trade than tariffs, particularly if domestic demand for a
commodity is not sensitive to increases in price. Because the effects of quotas cannot be offset by
depreciation of the foreign currency or by an export subsidy, quotas may be more disturbing to the
international trade mechanism than tariffs. Applied selectively to various countries, quotas can also
be a coercive economic weapon.
Tariff quotas may be distinguished from import quotas. A tariff quota permits the import of a certain
quantity of a commodity duty-free or at a lower duty rate, while quantities exceeding the quota are
subject to a higher duty rate. An import quota, on the other hand, restricts imports absolutely.

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