Tariffs and Quotas

Tariffs and quotas are trade policy instruments that reduce commerce with foreign nations. Tariffs, also known as duties, are taxes imposed on imports or exports of goods. Quotas are legal limits on the quantity of a particular good that can be imported or exported. Trade policy has [Page 3345]important social and ethical implications. Although tariffs, quotas, and other trade barriers are often portrayed as benefiting the domestic economy at the expense of foreign nations, they have important consequences for the distribution of income within the country that imposes them. For example, import tariffs reduce foreign competition faced by domestic producers but make the protected goods more expensive for both domestic consumers and other domestic producers that use them as inputs. Opponents of free trade often ...