Quotas Vs Tariffs

Import quotas have peculiar properties and problems distinguishing them form tariffs.

1. Usually quotas fix a rigid quantitative limit on imports. Thus they are harsh are inflexible in their operation. In case of tariffs on the other hand, no such rigidity les a tariff is rather mild and flexible in its restrictive influence.

2. In their impact generally import quotas are absolutely protective. A tariff however need not prove absolutely protective under tariffs the con, modify can freely enter on payment of duties. Thus the superiority of a quota over a tariff lies in the certainty of its restriction of imports.

3. In its protective effect however, the quota system provides protection to old inefficient firms as it generally favours established importers in giving license. Tariffs shelter the domestic market from foreign competition.

4. Under a tariff its probable effect upon price would be reasonably clear but its impact on the quantity of imports will be uncertain. In the case of an import quota its effect on the quantitative rustication would be explicitly but its impact on the prices will not be very certain.

5. Tariffs permit the market force of supply and demand to operate freely quotas however by fixing a maximum limit on sappy inhibit the free play of market forces. As against tariffs however quotas introduce a wholly arbitrary new dimension in foreign trade of an imposing county thus quotas involve greater consciousness in the value judgments than tariffs.

6. Under quotas domestic price would increase more than under tariffs because when the quantity imported is fixed under the quota any change in demand and supply in the domestic market or would market have to be adjusted. Not thorough changing import quantities but rather through altered price. 

7. When tariffs are imposed the rise n price is absorbed partly or fully by the state as revenues. Thus the revenue effect of tariffs is favourable to the state most quotas however fail to bring any revenue to the government.

8. Further, importer under a quota system are placed in a monopoly like position and as a result of rising price are able to reap high profits called quota profits.

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