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Quotas and tariffs or a combo of the two. Quotas restrict the number or quantity of a product that can come in. While tariffs place a tax or fee on the imported product to get its price/cost in line with the price of our homeland produced goods. Some tariffs charge a flat fee per unit, say $2 per incoming watch. While other tariffs place a % per watch, which means more tax revenue would be charged on a Rolex vs. a plain Swiss watch. I don't really favor anything that restricts trade, but I understand why we do these things.

2007-03-15 06:47:15 · answer #1 · answered by econgal 5 · 0 0

The government will have tariffs low on industrial equipment to expand production of consumer goods. The tariffs are kept high on forgien consumer goods to bring in tax dollars. This policy tend cause domestic producers to make substandard products since their limited competition. It hurts the consumer every time because the quality tends to suffer from import controls. Untied States practiced this till the early 20th century, and realized it made prices too high for the consumer, and the GOP was Grand Old Protectionist party, and it caused the great depression partly.
Domestic producer does not lose profits, or and the worker keeps their job, but the 80% of the population pay higher prices with import controls, and substitution polices. Look at Brazil and Mexico economic to see it played or present day Argentina.

The policy is good tax revenue maker, but import subsist ion leads to building of basic industry, but the trade-off in practice is seen today in Latin America with corporatist economies.

Free Trade is best thing to make the economy competitive, and import controls leads to crappy goods over time.

2007-03-15 21:12:31 · answer #2 · answered by ram456456 5 · 0 0

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