Types of Tariffs
Specific Tariff
Ad Valorem Tariff
Compound Tariff
Tariffs
What would happen if residents of your state switched from a policy of open
trading with other states to one of self-sufficiency?
Given the clear benefits that nations can derive by specializing and trading
Why would anyone ever object to free international trade?
Despite benefit to nation as a whole, some groups within the country, in
short-run, are likely to lose from free trade
Even while others gain a great deal more
Instead of finding ways to compensate the losers
Often allow them to block free-trade policies
Quotas
Government decree limiting imports of a good to a specified maximum
physical quantity
Because goal is to restrict imports, a quota is set below the level of
imports that would occur under free trade
General effects are same as a tariff
Reduce quantity of imports and raise domestic prices
Protectionism
Groups who suffer from trade with other nations have developed a number
of arguments against free trade
Together, these arguments form a position known as protectionism
Belief that a nations industries should be protected from free
trade with other nations
Strategic trade policy and support for infant industries are controversial
May partly explain why United States has for decades been among the
strongest supporters of free trade ideal
United States has protected U.S. sugar producers from foreign competition
since 1930s
Since 1980s protection has been provided in the form of a price
guarantee
If U.S. sugar prices fall below 22, government will buy the
sugar at that price
Hurts the poorest countries in the world that rely on sugar as an important
source of export revenue
Sugar quotas harm to these countries has been estimated at about
$1.5 billion per year
Why do we bear these costs?
Because of lobbying by groups who enjoy highly concentrated benefits
NTBs: Import quotas
Quotas are a restriction on the quantity of a good that may be imported in
any one period (usually below free-trade levels)
Global quotas restrict the total quantity of an import, regardless of origin
Selective quotas restrict the quantity of a good coming from a particular
country
Tariff-rate quota
The tariff-rate quota is a two-tiered tariff
A specified number of goods (up to the quota limit) may be imported at
one (lower) tariff rate, while imports in excess of the quota face a
higher tariff rate
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