A survey of protectionism from import quotas

It is the purpose of this paper to analyze the contributions to the theory of protectionism from import quotas and to compare quota protection with tariff protection. Partial and general equilibrium analysis are used to compare the effects of quotas on consumption, production, and income distribution with tariffs and free trade. Edgeworth boxes are used to determine the effects of quotas on trade in a pure exchange model. Tariffs and quotas are found 'equivalent' in the static context of both partial and general equilibrium analysis. By 'equivalent' we mean both can be used to produce identical results with respect to prices, production, consumption and income distribution. The 'equivalence' breaks down in the dynamic context due to the different adjustment mechanisms of the two systems. Quotas are shown to adjust to shifting markets through changes in relative prices while adjustment under the tariff takes place through changes in the quantities traded. In the dynamic partial equilibrium model we find the quota more protective than the tariff in the 'tightening' market and less protective in the 'softening' market. Our findings in the 'tightening' market contradict the historical reliance on tariffs in markets with inelastic demand. In the 'softening' market context the use of tariffs is found valid