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Dave firmly opines that the effect of tariffs and quota are same on consumers that they have to spend higher. Dave says that money simply changes hands. At times, government prefers voluntary quotas in which a foreign nation on its own agrees for its exports to a fixed number. It helps the US because then they need not pass any legislation to enforce any quota on the foreign nations. Importers get scarce licenses to import the goods and in turn make huge profits. Whether tariffs, quotas or voluntary quotas are imposed, finally, the price to consumers goes up. It is estimated that impact of such voluntary quota restriction to import cars from Japan is almost $400 per car. Overall, consumers paid an extra $4 billion because free imports were not allowed. Tariffs, quotas restrict innovation in the domestic industry. Tariffs and quota provide cushioning to the domestic industry as they can sell goods at higher prices. Whenever the government resorts to a voluntary quota kind of system, foreign manufacturers establish manufacturing facilities in the US itself. This way, American jobs are created but products are certainly expensive compared to imports due to high labor costs involved. In tariff, or quota system, producers spend more time lobbying with the government to maintain or increase those restrictions so that they are safeguarded. Manufacturers become less innovative when free trade is not allowed and consumers do not get novelty and better products, processes or systems. Nations differ in available resources such as skilled or unskilled laborers, land, technology, metals, minerals, or energy resources and accordingly, they differ in their ability to produce goods at the most competitive prices. Technologically advanced country such as US can produce Boeing planes, high tech ammunitions or other high tech products and can earn much higher. The point is that the US has absolute advantage in agriculture production due to huge land stock; does that mean that the US should put all its resources on agriculture? Certainly, the answer is negative. The fact is that not all nations can produce all goods. Each nation’s comparative advantage in producing a specific good differs significantly. As discussed in the article, the US does not have comparative advantage in producing television sets due to higher labor costs compared to Japan. The discussion is all about tariffs and quota; their drawbacks and how it hampers free trade internationally. Free trade benefits consumers because best quality products are available at the most economical prices. Consumer satisfaction is at its top if free trade is allowed to take place. That also enhances disposable income of the consumers (due to savings realized while purchasing imported goods) diverting the money for buying other goods. This eventually boosts economy of the nation. The biggest argument that is put forward in favor of tariffs and quota is for protecting employment within the country. For example, the US cannot produce garments and other textile apparels at the cost that countries such as China or India can produce due to high involvement of laborers in its production processes. If the US imposes tariffs or quota on these countries for importing textiles then that means that, the US textile industries and laborers are protected at the cost of US consumers. In such a situation, increased spending on textiles and garments by consumers will result into ...Show more


Name Surname Supervisor Subject Date Article – Tariffs versus Quota The article is all about tariff and quota applicable on foreign made goods. According to Ed, tariffs and quotas are essentially different things. A tariff is equivalent to tax imposed on foreign goods while a quota is the fixed quantity that is allowed to come in the US…
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Summarizing Article
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