Instructor’s Manual
CHAPTER 5
NONTARIFF TRADE BARRIERS
CHAPTER OVERVIEW
This chapter considers policies other than tariffs which restrict the volume of international trade. Such policies
are known as nontariff barriers to trade.
The first nontariff barrier considered is the absolute import quota. A quota can be administered on a global
basis or on a selective basis. Special attention is given to the revenue effect of an import quota which may be
After completing this chapter, students should be able to:
• Identify the major nontariff barriers to trade.
BRIEF ANSWERS TO STUDY QUESTIONS
2. The revenue effect of a tariff is captured by the government, while a quota’s revenue tends to be
Instructor’s Manual
3. Subsidies include domestic subsidies and export subsidies. Methods used to subsidize producers include
tax concessions, low interest rate loans, and loan guarantees.
4. Voluntary export restraints are market-sharing agreements negotiated by producing and consuming
6. Since import quotas directly limit the number of goods that can enter the home nation, they tend to be
7. Sporadic dumping—firms with temporary inventories sell their products overseas at lower prices than at
8. Domestic subsidies avoid the deadweight losses due to the consumption effect.
9. Subsidies are not free goods since they are financed by taxpayer dollars. In return for granting subsidies,
10. The import quota tends to permit domestic firms and workers to enjoy higher sales, profits, and
12. Under an import quota, the distribution of the revenue effect is indeterminate, depending on the relative
bargaining power of foreign producers and domestic buyers. Because voluntary export quotas are
Instructor’s Manual
19. A tariff-rate quota attempts to minimize the consumer costs of protectionism by applying a modest within–