– NonTariff Barriers (NTBs) and Arguments for Protection
include quotas, subsidies, health & safety standards, government procurement
2. Arguments for protection
– protection of jobs, industry restructuring, national
defense, government revenue.
Conclusions: a) most arguments for protection have no
merit, and b) even when arguments in favor of protection are valid (save jobs, etc.),
protectionism is seldom the best way to achieve the stated goal.
Gov’t. imposed limits on imports or exports, either quantity or value, e.g.,
maximum M of 1.25m tons of sugar/year, or maximum M of $25m of cotton blouses.
Effect of quota
: Same as tariff, Price _____ , Q
domestically _______ and M _______.
Complete ban on M or X (Quota = 0), e.g. Cuba embargo on M (1962) and
Cuba appealing to UN and US to lift embargo.
Other current embargoes
exist for Iran, Iraq, Libya and N. Korea, see the list as of 2002 at:
Export embargoes are used for national defense reasons, to restrict X of certain “high-
tech” goods to unfriendly countries, to limit military expansion or development of
See Dept of State website for current embargoes on defense goods and
services to specific countries:
Quotas are generally
than tariffs, so the WTO prohibits quotas for most
manufactured products, exceptions are agricultural products; and textiles and apparel
(being phased out by 2005).
As all quotas get phased out,
tariff rate quotas
are often used, which is a two-part tariff combined with a quota.
Up to the quota, tariff
rates are low or zero to the “in-quota volume”), and above the quota tariff rates are
significantly higher for the (“over quota volume”).
U.S. TRQ for peanuts.
In-quota volume = 53,000 metric tons, in-quota tariff
is free for Canada, Israel, Caribbean Basin, Andean Pact, 9.35¢/kilogram for Argentina.
Over quota tariff is 164% for all countries.
For $100 of peanuts, the tariff is $164, total
cost is $264, or 2.64X the actual value.
International trade law also allows temporary quotas for temporary protection of locally
distressed industries, or for balance-of-payments problems.
January 23, 2012