NontariffTradeBarriers©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse1PowerPointslidespreparedby:AndreeaChiritescuEasternIllinoisUniversityImportQuota•Importquota•Physicalrestrictiononthequantityofgoodsthatcanbeimportedduringaspecifictimeperiod•Requireanimportlicense•Specifiesthetotalvolumeofimportsallowed•Onmanufacturedgoods•OutlawedbytheWorldTradeOrganization©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse2©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse3ExamplesofU.S.importquotas*TABLE5.1ImportQuota•Globalquota•Permitsaspecifiednumberofgoodstobeimportedeachyear•Doesnotspecifyfromwheretheproductisshippedorwhoispermittedtoimport•Plaguedbyaccusationsoffavoritism•Selectivequota•Importquotaallocatedtospecificcountries•Mayleadtoadomesticmonopolyofproductionandhigherprices©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse4ImportQuota•Effectsofimportquotaoneconomy’swelfare•Priceincrease•Decreaseinconsumersurplus•Redistributiveeffect•Deadweightloss•Protectiveeffect•Consumptioneffect•Revenueeffect•Windfallprofit•Quotarent©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse5Byrestrictingavailablesuppliesofanimportedproduct,aquotaleadstohigherimportprices.Thispriceumbrellaallowsdomesticproducersoftheimport-competinggoodtoraiseprices.Theresultisadecreaseintheconsumersurplus.Ofthisamount,thewelfarelosstotheimportingnationconsistsoftheprotectiveeffect,theconsumptioneffect,andthatportionoftherevenueeffectthatiscapturedbytheforeignexporter.©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse6Importquota:tradeandwelfareeffectsFIGURE5.1ImportQuota•Allocatingquotalicenses•Historicalshareofimportmarket•Oilanddairyproducts•Discriminatesagainstimportersseekingtoimportgoodsforthefirsttime•Proratabasis•U.S.importersreceiveafractionoftheirdemand•=RatiooftheimportquotatothetotalquantitydemandedcollectivelybyU.S.importers©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse7ImportQuota•Allocatingquotalicenses•Auctioningofimportlicenses•Tothehighestbidderinacompetitivemarket•Government-capturethewindfallprofits•ConsideredbyU.S.©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse8QuotasVersusTariffs•Duringperiodsofgrowingdemand•Animportquotarestrictsthevolumeofimports•Byagreateramountthandoesanequivalentimporttariff•Quota•Morerestrictivethanatariff•Suppressescompetition©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse9Inagrowingmarket,animporttariffisalessrestrictivetradebarrierthananequivalentimportquota.Withanimporttariff,theadjustmentthatoccursinresponsetoanincreaseindomesticdemandisanincreaseintheamountoftheproductthatisimported.Withanimportquota,anincreaseindemandinducesanincreaseinproductprice.Thepriceincreaseleadstoariseinproductionandafallinconsumptionoftheimport-competinggood,whilethelevelofimportsremainsconstant.©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse10TradeeffectsoftariffsversusquotasFIGURE5.2Tariff-RateQuota:ATwo-TierTariff•Tariff-ratequota•Two-tiertariff•Aquotathatdefinesthemaximumvolumeofimports•Andchargesthewithin-quotatariff•Anyimportsabovethislevelfaceahighertariffrate•Over-quotatariff©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword‐protectedwebsiteforclassroomuse11©2011CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplica