Discuss pros and cons of imposing quotas on some imported goods. How would

[Brian]

this affect the American economy? I'll be honest, it's a homework question. Trouble is, I'm in a business class and I know nothing about business or where to turn for an answer. Help out someone in need of an A? LOL!

 

[Just did it!]

pros: they benefit domestic producers of that good. b/c there are less imports competing with them.

cons: they hurt consumers of that good through higher prices of imports or lower quality of domestic goods.

Another con is that domestic producers have no incentive to improve quality or reduce costs, so in the long term they will still lose out to foreign good either b/c importers will establish assembly plants inside the country (this is what happened to Big 3 Automakers), or price/quality gap between domestic and imported goods will become so large that even quotas would not help (as it happened with clothes manufacturing in US)

 

[Unregistered]

What is the effect of a country devaluing its currency (like China, for example)?

 

[Unregistered]

Some pros of import quotas are:
- They keep people from losing their jobs because companies can only import so much of a product and they have to manufacture the rest themselves.
- They keep other countries from dumping their excess goods in the country and possibly driving a competing company out of business.
- They help domestic companies more money because they can charge a little more for their goods.

Some cons of import quotas are:
- Other countries could do the same thing.
- Domestic prices for the protected goods would increase.
- Quality of products manufactured by domestic companies could decrease.

A technique to use with quotas is to impose the quota for a limited amount of time with the idea being that domestic companies know that when the quota is lifted, they will have to once again deal with the competitive lower prices of the imported goods. That could give them incentive not to raise prices at an extreme rate.