If politicians decide to proceed with protection, why might ...

[armygirl]

If politicians decide to proceed with protection, why might economists prefer tariffs to quotas? Explain at least three reasons.
 
  What will be an ideal response?

Question 2

Some claim that China's trade surpluses are created by currency undervaluation. Is this true? Explain.
 
  What will be an ideal response?

[abro1885]

Answer to Question 1

 The greater welfare loss from quotas since quota permits are not generally sold
 The inability of quotas to respond to increases in domestic demand except through higher prices and increased producer surplus. With tariffs, the volume of imports simply adjusts to changing market conditions and market prices are less volatile.
 Tariffs are more transparent and probably less costly to administer.
 Tariffs favor the most efficient foreign producers. They don't arbitrarily limit entry or discourage innovation by foreign firms (but they do for domestic firms, meaning we are creating a situation that rewards foreigners for being innovative and efficient, something not in the long run best interests of domestic firms).

Answer to Question 2

Some observers argue that China gets trade surpluses by manipulating its currency and keeping it undervalued. More careful analysis can show that China's currency may have been undervalued against the dollar in the first part of the 2000s, but that has not been the case since 2006 or 2007. In other words, currency manipulation is not the source of its competitiveness.