a) Tariff

DEFINITION of 'Tariff'
A tax imposed on imported goods and services. Tariffs are used to restrict trade, as they
increase the price of imported goods and services, making them more expensive to
consumers. A specific tariff is levied as a fixed fee based on the type of item (e.g.,
$1,000 on any car). An ad-valorem tariff is levied based on the items value (e.g., 10% of
the cars value). Tariffs provide additional revenue for governments and domestic
producers at the expense of consumers and foreign producers. They are one of several
tools available to shape trade policy.
EXPLAINATION of 'Tariff'
Governments may impose tariffs to raise revenue or to protect domestic industries from
foreign competition, since consumers will generally purchase foreign-produced goods
when they are cheaper. While consumers are not legally prohibited from purchasing
foreign-produced goods, tariffs make those goods more expensive, which gives
consumers an incentive to buy domestically produced goods that seem competitively
priced or less expensive by comparison. Tariffs can make domestic industries less
efficient, since they arent subject to global competition. Tariffs can also lead to trade
wars as exporting countries reciprocate with their own tariffs on imported goods. Groups
such as the World Trade Organization exist to combat the use of egregious tariffs.
Governments typically use one of the following justifications for implementing tariffs:
* To protect domestic jobs. If consumers buy less-expensive foreign goods, workers
who produce that good domestically might lose their jobs.
* To protect infant industries. If a country wants to develop its own industry producing a
particular good, it will use tariffs to make it more expensive for consumers to purchase
the foreign version of that good. The hope is that they will buy the domestic version
instead and help that industry grow.
* To retaliate against a trading partner. If one country doesnt play by the trade rules
both countries previously agreed on, the country that feels jilted might impose tariffs on
its partners goods as a punishment. The higher price caused by the tariff should cause
purchases to fall.
* To protect consumers. If a government thinks a foreign good might be harmful, it might
implement a tariff to discourage consumers from buying it.

c) Quota
DEFINITION of 'Quota'
A government-imposed trade restriction that limits the number, or in certain cases the
value, of goods and services that can be imported or exported during a particular time
period. Quotas are used in international trade to help regulate the volume of trade
between countries. They are sometimes imposed on specific goods and services to
reduce imports, thereby increasing domestic production. In theory, this helps protect
domestic production by restricting foreign competition.
INVESTOPEDIA EXPLAINS 'Quota'
Quotas are different than tariffs (or customs), which places a tax on imports or exports
in and out of a country. Both quotas and tariffs are protective measures imposed by
governments to try to control trade between countries. The U.S. Customs and Border
Protection Agency, a federal law enforcement agency of the U.S. Department of
Homeland Security, is in charge of regulating international trade, collecting customs and
enforcing U.S. trade regulations. Smuggling - the illegal transfer of goods into a country
- is a negative side effect of quotas and tariffs.

d) Voluntary Export Restraint

DEFINITION of 'Voluntary Export Restraint - VER'
A trade restriction on the quantity of a good that an exporting country is allowed to
export to another country. This limit is self-imposed by the exporting country. Typically,
VERs are a result of requests made by the importing country to provide a measure of
protection for its domestic businesses that produce substitute goods. VERs are often
created because the exporting countries would prefer to impose their own restrictions
than risk sustaining worse terms from tariffs and/or quotas.
INVESTOPEDIA EXPLAINS 'Voluntary Export Restraint - VER'

The most notable example of VERs is when Japan imposed a VER on its auto exports
into the U.S. as a result of American pressure in the 1980s. The VER subsequently
gave the U.S. auto industry some protection against a flood of foreign competition.
However, there are ways in which a company can avoid a VER. For example, the
exporting country's company can always build a manufacturing plant in the country to
which exports would be directed. By doing so, the company will no longer need to
export goods, and should not be bound by its country's VER.