International Economics Equal Policies

Question: Describe about the Report for International Economics for Equal Policies. Answer: The reasons why tariffs are more preferred as compared to that of quota are as follows: Tariffs help in generating revenue for the government the following can help to explain the reason why the economists mainly prefer tariff over quantitative restriction also known as quota. For example, if the Government in the U.S levies a tariff of 20 percent on the imported cricket bats of Australia; in that case they will be able to collect an amount of $10 million dollars each year if $50 million worth of the Australian cricket bats are imported every year. As per the report, the U.S collects more than $20 billion dollars each year in tariff revenue. However, this earned amount will be gone astray to the government unless their quota method incriminates a licensing fee on the importers (International Economics A Heterodox Approach 2015). Administrative corruption can take place due to imported quotas the import quotas can cause administrative corruption. If for instance, there are no limitations on the cricket bats that are imported, out of which 30,000 bats are sold each year to the U.S. however, if the U.S decides that they require only 4,000 Australian cricket bats to be sold each year. In that case, they can impose an import quota at 4,000 in order to achieve the purpose. However, there will be a problem regarding making the decision they will make about the 4,000 bats that will get in and the 26,000 that will not. In that case, the government needs to tell some importer that they will be able to let their cricket bats in the country and the rest will not be able to. This will in turn give the customs bureaucrats the authority to give access to the importers who are favored and they will deny the access of those who are not favored. This will in turn lead to a severe corruption in the countries with import quota s. However, in the same situation the tariff system will not lead to any corruption. This is because the tariff will set the level, which causes the price of the cricket bats to rise dramatically so that the demand for the bats falls to 4,000 each year (Lavergne 2014). 2. Let wine be good X and cheese be good Y. When the price of wine will increase, the budget constraint will rotate clockwise around the good cheese. As a result, the consumers will face a new relative price (International Economics A Heterodox Approach 2015). After facing the new budget constraint, the new equilibrium will be at point E. As a result, the consumers will buy more of cheese that is from 80 to 120 units. However, they will consume less of good x that is wine. As a result, the consumption will decrease from 90 to 40 units. As a result, the consumers will purchase 40 units more of cheese and 50 units less of wine. Since the unit of cheese will increase, its export will increase however, the import will decrease. In the case of wine, it will be totally vice versa that is the import will increase as the unit of production will decrease, however the export of the good will decrease (Ding et al. 2013). 3. The export taxes are not used by the United States at all. As per the U.S Constitution, No Tax or Duty shall be laid on Articles exported from any State. The Southern States mainly exported the agricultural goods such as cotton and tobacco at that period when the United States were formed by the union of the thirteen colonies. Since the economies of the northern states were much oriented towards the domestic market, it did not export enormously. The southern states feared the fact that the government would tax the exports (DeBacker et al. 2015). If that would take place, it would have been an expedient source of income for the cash-strapped new government. As a result, the Constitutional Convention of the Southern States was allotted to include a ban on the export taxes with the intention of preventing a simple bulk in Congress from enforcing a tax. If the Congress were successful in enforcing the tax it would affect the exporters from the Southern States unreasonably. Since, the northern industries were seeking for protections from the British industrial imports, the restriction on imports were not banned (International Economics A Heterodox Approach 2015). References Blonigen, B.A., Liebman, B.H., Pierce, J.R. and Wilson, W.W., 2013. Are all trade protection policies created equal? empirical evidence for nonequivalent market power effects of tariffs and quotas.Journal of International Economics,89(2), pp.369-378. DeBacker, J., Heim, B.T. and Tran, A., 2015. Importing corruption culture from overseas: Evidence from corporate tax evasion in the United States.Journal of Financial Economics,117(1), pp.122-138. Ding, W., Qin, T., Zhang, X.D. and Liu, T.Y., 2013, June. Multi-Armed Bandit with Budget Constraint and Variable Costs. InAAAI. International Economics A Heterodox Approach. (2015). 2nd ed. London and New York: Routledge, p.346 - 549 Lavergne, R.P., 2014.The political economy of US tariffs: An empirical analysis. Elsevier.