83. The difference between an import tariff and an import quota

C.M. Heydenrych January 2017. The difference between an import tariff and an import quota.

The difference between an import tariff and an import quota is relatively simple - a tariff is an amount that the importer needs to pay based on a percentage of the value of the goods.

This will provide the government an income.

A quota is a quantitity of goods that may be imported. This merely restricts the quantity of goods that may be imported.

Both of these interventions in the market is detrimental to the consumer as it will result in an increase in price. The first will be a direct increase since the cost of the product will have increased, the second will result in the market price to increase because of the artificial shortage that has been created by the quota.

Both of these methods also increase the probability for smuggling and corruption to come into being and though useful as short term instruments to solve a particular problem have long term negative impacts on the economy such as protecting inefficient producers locally at the expense of the consumer.

These practices lead to the increase of input costs to manufacturers which make them less likely to have the competitive advantage when exporting.

It also restricts imports from exporting countries, which in a global market means that we are in effect restricting our exports since foreign importing countries have not earned the currency through their exports to be able to import our goods and services.

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