South-Western College Publishing - Economics  
A Tariff-ic Proposal?
Subject Tariffs and Quotas
Topic International Trade
Key Words Tariffs, Quotas, Exports, Imports, Balance of Payments, Trade Deficit
News Story

The World Bank and International Monetary Fund have proposed allowing some of the poorest African and Latin American nations to sell their goods in the United States and other Western industrialized nations without tariffs or quotas. Increasing exports is a way of promoting economic growth and will produce increased income in those countries. The Clinton Administration currently opposes this proposal. While the Administration is for efforts to forgive debt, it does not support measures to reduce tariffs because it believes it would endanger support for its Africa trade bill and efforts to give China permanent normal trading status.

The question of whether tariffs and quotas should be lowered is part of the issue of the relationship between rich and poor nations. The poorer nations argue that the United States and the other Western industrialized nations are using their technology and prosperity to grow rapidly at the expense of countries that are left behind by economic globalization. The U.S. would agree that trade is the best vehicle for lifting nations out of poverty. However, there are political pressures within the United States that are pushing the Administration to propose narrower reductions. At a time of record trade deficits, labor unions and others have argued against a further relaxation of trade restrictions. Especially during an election year, efforts by members of Congress to protect industries in their states may lead to votes against freer trade proposals. While the United States has a record of supporting preferential trade privileges for the least-developed nations and continues to support debt relief, the complete abolition of tariffs and quotas does not seem likely at this time.

(Updated May 1, 2000)

Questions
1. What is a tariff? What is a quota?
2. How do tariffs and quotas reduce the amount of goods imported from other countries?
3. What would happen to the U.S. trade deficit if tariffs and quotas from poorer nations were abolished?
4. How would increased exports benefit a poorer nation?
Source David E. Sanger, "U.S. Resists Bid to End Tariffs For 3rd World;" The New York Times, April 9, 2000.

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