Answer to Question #201186 in Macroeconomics for Nosipho

Question

List and provide a short explanation on four trade policy measures available to countries to limit imports

Answer 1

Tariffs - this is tax on imported goods and services. A country can limit imports by raising their tariffs thus raising the cost of selling imported goods in a country.

Quotas - it is the direct restriction on the quantity of a good/service that may be imported in a specified period. Quotas limit total supply of imports and thus increase the domestic price of the commodity on which they are imposed. Quotas are meant to specify the limit of an exporting country's share of a domestic market.

Voluntary Export Restrictions (VER) - it's a form of trade barrier where foreign firms agree to limit the quantity of goods exported to a certain country. Although termed "voluntary", it is often levied at the behest of the importing country.

Subsidies - this is where a country's government offers subsidy to a particular domestic industry to make those goods cheaper to produce than import from foreign markets. This lowers the domestic price and thus, raises the price of imported commodities relative to domestic commodities, which lowers imports.