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Finance & Accounting
Pages 4 (1004 words)
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.
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. ...
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