If the quota were to be granted to a domestic resident, then the rent that would be generated would be kept within the domestic economy, and therefore it would be referred to as a 'domestic rent capture barrier'. (Non-tariff Barriers: The Reward of Curtailed Freedom)
However, the fact is that though the rent remains at home, what happens is that an inevitable 'income redistribution effect' takes place. This means that while rent is captured by a very few license holders, the imposition of a tariff would have the benefit of spreading the rent more liberally and equally. The tariff, however, accrues, at the outset, to only one party, the 'fiscus'. The advantage herein is that afterwards, it can be utilized in the various expenditures on public improvement projects that are undertaken by the government, so this means that this rent would benefit a large number of people, and not just a very few exclusive license holders. The holding of the quota is important, however, and cannot be discounted at all. Those individuals who feel that they are close to sources in the government via the means of 'lobbies' and the more dubious means of 'nepotism' would receive the rent, and what this signifies is that the wealth passes from the hands of the government to the hands of the wealthy, and not to the needy, as was its original purpose.
Thus, it can be stated that the quota system is rather disadvantageous in terms of the equal distribution of wealth, and this is despite the fact that it does give the government an innate political advantage of being able to favor its various and numerous supporters at every level. This type of dilemma of income distribution can only be solved by making the government sell the quotas, which would have the desired result of the regaining of control of the rent quotas, and also making available tax revenue under a tariff. In addition, the VER or the 'Voluntary Export Restraint' is actually a quota derivative that demonstrates the fact that the right to quota rent is very often ceded to various suppliers, in a foreign country, and the very transfer of quota rents brings about a welfare loss to the domestic country, and this in turn will result in greater losses. The VER, however, is often described as a 'foreign rent creating barrier'. The GATT can therefore be seen as limiting the policy instruments that are available at large to governments, and there would be innumerable welfare benefits were one to restrict one to the policies described within the GATT. (Non-tariff Barriers: The Reward of Curtailed Freedom)
Tariff negotiations have been going on for more than fifty long years in GATT, and then in the WTO, and these have served to significantly reduce the market access barriers for non-agricultural products. What must be remembered, however, is the fact that process oriented approaches to the problem, like for example, formulas, offers, and requests all apply to several different starting points, and this very principle of making allowances has resulted in the phenomenon of shaping the tariff structures around those members who are heterogeneous. This means that in developed countries, the tariff structures...
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