3.3.1
Note

Non-Tariff Protectionist Measures

Idea

A tariff is only one instrument of protectionism. Governments also restrict imports through quantity controls, diplomatic pressure, the exchange rate, and producer subsidies. All work by the same logic — raising the relative price or limiting the quantity of imports so consumers and producers switch to domestic goods — but they differ in how, and in whether they raise revenue.

Mechanism

  • Quotas. A quota is a limit on the quantity of imports allowed in over a period. Set below the free-trade import quantity, it forces consumers who cannot buy imports onto domestic goods. Its effects on producers and consumers resemble a tariff’s — except that a quota raises no government revenue, since there is no tax on the imports that do enter.

  • Voluntary export restraints (VERs). Instead of imposing a quota, the government asks a trading partner to voluntarily limit its exports to the domestic market — typically backed by the threat of harsher measures if the partner refuses.

  • Currency manipulation (devaluation). By selling its own currency on the foreign-exchange market, a government weakens it. Exports become cheaper to foreigners (raising quantity of exports demanded) and imports dearer to domestic buyers (lowering quantity of imports demanded), so consumers switch from imports to domestic goods.

  • Subsidies to domestic producers. A subsidy lowers domestic producers’ costs of production, raising their price competitiveness against foreign rivals, and can also raise the quality of domestic goods. Domestic consumers then switch from imports to cheaper, higher-quality domestic output.

Considerations

The positive impacts and the limitations of these measures broadly mirror those of a tariff — protection of domestic output and jobs, set against efficiency losses and the risk of retaliation — so the tariff analysis carries over. The one structural difference worth stating in an answer is revenue: a tariff yields government revenue, whereas a quota or a VER does not.