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NON-TARIFFS BARRIER - Coggle Diagram
NON-TARIFFS BARRIER
WHAT IS FREE TRADE
Exist when nations can swap goods and services without the constraints of tariffs, duties or quotas
Nations can concentrate in manufacturing their specialties which typically other countries cannot produce
Revenues from selling the goods, nations can buy goods from other nations that they need
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PROTECTIONIST QUOTAS
Government impose protectionism to protect domestic producers of a good from cheaper foreign competition
EFFECTS OF QUOTAS
- Higher prices of goods causes the quantity demanded to fall
- When price increase, domestic quantity supplied also increase (rising prices will incentive domestic producers to produce more)
- Foreign producers: less quantity will be imported. For those who can import, the price will be higher
- Government: No impact because no revenue generated
- There is a loss of total welfare because the decrease in consumer surplus will exceed the increase in domestic producer surplus.
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GATT/WTO
When the country says they wont use tariffs, GATT will take over to address quotas.
The decline in quotas came increase in the use of voluntary export restraints or other non-tariff barriers.
When the GATT gone, the World Trade Organization evolved
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If one country complaint about another country trade policies, WTO will hear the complaint
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TARIFFS VS QUOTAS
QUOTAS
- There is no revenues generated
- The cost of producing goods is less than the price the good sells for in domestic economy
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TARIFFS
- Quantity of import falls when there is tariff
- increase the government revenues
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