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In terms of economic welfare in the importing country, the least-costly barrier to imports is a...

In terms of economic welfare in the importing country, the least-costly barrier to imports is a tariff, a worse policy is a quota, and an even worse policy is a voluntary export restraint (VER).

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An import quota results in an increased demand with an increased price but greater domestic production then tariff. Whereas tariff results in higher consumption and imports than with an equivalent import quota.As quotas involve the distribution of licensing it can give rise to corruption and one will devote greater time in lobbying and bribing the government. Quota limits the quantity to certain specified level whereas with tariff the quantity is uncertain.VER is a situation where an importing country induces another nation to reduce its exports and this policy has been highly negotiated since 1950. It was in Uruguay round that they phased out VER and prohibited the imposition of any new VER as it was less effective in limiting imports as VER reduced national welfare by creating negative distortions in production and consumption.

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