[PDF Notes] What are the Merits of Quotas over Tariffs?

(i) As compared to tariffs, quotas are more precise in nature and more certain in effect.

(ii) Quotas are more popular and less resented by the trading nations than tariffs.

(iii) Quotas are preferred in the situations where domestic demand for the imported commodity is inelastic.

(iv) Quotas also have a strong case under the conditions of highly inelastic foreign supply.

(v) Quotas are administratively more flexible instruments of commercial policy than tariffs. Quotas can be more easily imposed and more easily removed. Tariffs, on the other hand, are relatively permanent measure and are more difficult to remove.

(vi) Quotas prove more useful in those situation where the domestic consumers and foreign exporters are needed to be checked effectively, i.e.,

(a) When the country is facing foreign exchange problem;

(b) When the country is passing through a period of economic distress and wants to check the outflow of domestic income by imports;

(c) When there is deflation abroad and the foreign exporters want to transmit this deflation to the importing country by stimulating exports.

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