Tariffs， Quotas

Tariffs are taxes that a government levies on imported goods.

Tariffs reduce the demand for imported goods by increasing their price above the free trade price.

Quotas restrict the quantity of a good that can be imported into a country, generally for a specified period of time.

An import license specifies the quantity that can be imported.

With quotas, foreign producers can often raise the price of their goods and earn greater profits than they would without the quota. These profits are called quota rents.

A voluntary export restraint (VER) is a trade barrier under which the exporting country agrees to limit its exports of the good to its trading partners to a specific number of units.

The VER allows the quota rent resulting from the decrease in trade to be captured by the exporter (or exporting country), whereas in the case of an import quota there is ambiguity regarding who captures the quota rents.