Tariffs and Quotas Essay Example | Topics and Well Written Essays - 3250 words

Tariffs and Quotas - Essay Example There are many basic similarities between the tariff and the quota, particularly in the way they both relate directly to economic relations within and without a nation; there are several basic differences as well, however, which determine which of these strategies should be employed in any particular situation. Figure 1 lists the ways in which tariffs and quotas and the same and different. Originally speaking, tariffs were imposed in early empires and principalities; ancient Germanic, Slavic and Arabic societies imposed tariffs on imported goods to protect their own established, small economies while simultaneously strengthening trading ties and making beneficial political and economic connections with other parts of the world (Heichelheim, 1957, p. 111). It was the foresight of ancient society leaders that has led to the current state of international trade and helped formulate the basis for contemporary economics. Revenue tariffs essentially help to maintain the structure of a local economy despite the influx of foreign goods and produce; some countries have little income and must rely on tariffs to keep their economies stable (Howard, 2001, p.226). Quotas were introduced in cultures such as the Az... the establishment of the Soviet Union as a way to unite the workers and ensure that everyone was doing their part to keep the economy running (Vaillant, 1962, p.190; Ellman and Kontorovich, 1998, p.221). The idea of the tariff is also quite ancient because since the very beginning of human society there has always existed competition between different groups of people. Despite friendly relations, certain products and produce that is available to one group may not be available to the other, and so trade is a natural occurrence between communities, cities, regions and countries. Figure 1 Tariffs and Quotas ' ' ' ' ' ' ' ' ' ' ' * Can pertain to international trade ' ' ' * Responsible for national revenue ' ' ' * Regulate local economy ' SIMILARITIES ' * Regulate international economy ' ' ' * Both can strengthen international trade ties ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' * Tariffs are always used in terms of ' ' ' international trade, whereas; ' DIFFERENCES ' * Quotas may relate directly to internal ' ' production ' ' ' * Tariffs can greatly impact foreign economy ' ' * Quotas create revenue for local sellers ' ' * Tariffs create revenue for the government ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' The Tariff Strictly speaking, a tariff is the tax that is placed on a foreign import upon its entry into another country. There are three basic types of tariff: revenue, protective and prohibitive tariffs. Each of these serves a specific purpose within the economy and is responsible for bringing in money from different market sectors with overseas origins. The imposition of tariffs on various imported goods ensures that the nation that imports