Tariff barriers are by far the oldest type of trade restriction, having been used for five hundred years or more. A tariff may be defined as a tax which is put on a commodity when it crosses a national boundary. The tariff is collected on an advalorem basis, where it is a percentage of the value of import. It can also be collected on a specific basis, where the amount paid depends on the physical quantity of the import. Both specific tariffs and advalorem tariffs are in common use.
Tariffs may be used simply to obtain revenue. In some developing countries, revenue tariffs provide an important part of the government’s income. Often, however, tariffs are protective, and are designed to carry out a particular economic policy. They may help to reduce a balance of payments deficit or to protect an infant industry against a strong international competition from older corporations. A revenue tariff will always provide some protection, and a protective tariff will produce some revenue.
Therefore, it is difficult to distinguish between revenue and protective tariffs from economic evidence alone. Many different types of non-tariff barriers have been used, but the best-known of these are quota systems. A quota is an upper limit which is set on imports of a commodity for a fixed period of time. Some quotas
apply to the physical quantities of particular goods, whereas others are based on the total value of all imports.
In the latter case, the quotas are usually
combined with a system of exchange control In an attempt to prevent a balance of payments deficit. Quotas are also used to protect domestic industries. Under most quota system, Importers must obtain government licenses for the goods they wish to import. It should be noted that a quota system is always protectionist and provides no revenue to the count.
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