Question

Discuss the various instruments of trade protection differentiate between quotas and tariffs

Answer 1

Answer:

Explanation:

Governments of different countries have to intervene in the area of international trade for both economic and non-economic reasons.

Such intervention goes by the name ‘protec­tion’. Protection means government policy of according protection to the domestic indus­tries against foreign competition.

There are various instruments or methods of protection which aim at raising exports or reducing imports. Here we are concerned with those methods which restrict import.There are various methods of protection. Most important methods of protection are tariff and quotas. A tariff is a tax on imports. It is normally imposed by the government on the imports of a particular commodity. On the other hand, quota is a quantity limit. It restricts imports of commodities physically. It speci­fies the maximum amount that can be imported during a given time period.

We can now make a comparison between tariff and quotas in terms of partial equilib­rium or demand-supply approach. Fig. 5.3 illustrates the effect of tariff. The domestic supply curve is represented by SD while the demand curve is given by Dd.

Answer 2

Most important methods of protection are tariff and quotas. A tariff is a tax on imports. It is normally imposed by the government on the imports of a particular commodity. On the other hand, quota is a quantity limit.