Tariffs, Quotas and Non-Tariff Trade Barriers Research Paper

Tariffs, Quotas and Non-Tariff Trade Barriers - Research Paper Example This paper illustrates that a tax levied by a government against certain imports, designed to raise revenue or to protect domestic firms. Although tariffs may be imposed on both imported and exported goods usually they are imposed on imported goods. Different types of tariffs are ad valorem tariff, specific tariff, revenue tariff, prohibitive tariff, a protective tariff, environmental tariff and retaliatory tariff. Tariffs restrict international trade as due to their imposition, exporters have to bear an additional cost, to which either they have to absorb which increases their approaching costs to the market and reduces their profits and causes a reduction in imports, or they have to raise their selling prices to cover the new expenses, which causes decrease in demand and resultantly imports. â€Å"Means of restricting the number of imports through import licenses, either of a certain item or from a certain country.† Its different types are a binding quota, non-binding quota, absolute quotas and tariff-rate quotas. Import quotas also restrict international trade as they limit imports to a specified level with certainty, replace market mechanism and according to Solusource, â€Å"If you are importing or exporting goods that are subject to a quota, you may have to compete with other buyers or suppliers that are attempting to negotiate similar deals† (â€Å"Identifying†). These are nonmonetary barriers to restrict imports. These are also called NTBs its common examples are embargoes, anti-dumping measures, biases against foreign company’s bids and countervailing duties etc. Although these are called nontariff trade barriers when they are implied they affect the international trade in about same way in which tariffs affect. Free trade environment leads closer to market perfection as it results in the better allocation and optimum utilization of resources, offers better and greater choices to customers and leads towards economic developm ent and customer satisfaction.