make a comment
1.Quotas and numerical restrictions are two of the trade-restriction ways through which the government uses to limit the inflow and out flow of the goods and services. The key difference between these two terms is that quota selects particular groups from the total, and the numerical restrictions set the number of target before they are imposed. For instance, these two terms are often used by countries as a way of migration regulations. Countries like Italy applies the rules of quotas by only granting specific countries of origins the right as legal immigrants. On the other hand, Australia sets an annual limit of humanitarian migration to 13,000.
2.The main differences between tariff and quota can be seen in the list below;
a) Tariffs refer to taxes that are charged on imported goods while quotas refer to a limit which is defined by the state or government on the quantity of goods produced within a foreign country and purchased domestically
b) Tariffs result in generation of revenue for the country thus an increase in the Gross Domestic Product while quotas are imposed on the numerical value of commodities as opposed to the amount thus quotas have no impact on the GDP of a country (Weaver, 2017).
c) The income generated from the collection of tariffs is the revenue belonging to the government. However, for quotas, traders will have some extra income after the amount is collected.
d) The effect of tariffs is seen on the consumer surplus since it falls while the producerâ€s surplus goes higher. In quotas, when the quota is placed, the consumer surplus goes down.
3.When a country exports its product at a lower price than the price it charges on its domestic markets, they are dumpling the product. WTO encourages countries to take action against dumping activities. The process of valuation helps countries to determine the actual value of the products so that they could avoid the “dumping†which goes against international law and causes unfair competition. However, unlike safeguard measures that help protect domestic industry, “the implementation of anti-dumping measures does not require the government to provide offsetting concessions or subsidies.†(Chapter, 2015) The quotas imposed by countries as a way of safeguard measures to remedy their trade-injuries should be carefully analyzed because it might help protect domestic markets, but also threaten the supplying countries.
4.Valuation methods may possibly associate dumping in international trade with the lowering of prices of certain product to levels that are lower than the price of the product in its domestic market or even below its cost of production with the objective of garnering a bigger share of the market or restricting the competition to the minimum if not completely destroy or remove it. The World Trade Organization or WTO has amti-dumping regulations in place. The anti-dumping duties are levied only after it has been proven that dumping has caused material damage. GATT allows nations to take measures against dumping. Several factors are considered for deciding dumping which include the volume of the product or service that is being sold at the substantial low price, the effect that such sale has on the price and sale of domestic products that are in the similar category, the impact of such sale on the domestic industry.
Example: President Bush accused China of dumping shrimps in the US. The domestic industryâ€s worth declined by $4 billion and resulted in 3500 job cuts.
Subsidy, on the other hand, is a kind of a financial support provided by the government of a country to the domestic companies by providing some financial assistance to cover for a part of the cost of production which helps to price the products lower that they should be. It benefits the seller by helping them capture market share and penetrate. For buyers, subsidy makes products affordable.
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