| Abstract: | Although many countries have adopted freer trade regimes orare in the process of reforming quantitative restrictions, suchreforms are not without shortterm costs. Sudden removal of quantitativerestrictions can release a surge of demand for imports thatcan deplete foreign exchange reserves and force rapid adjustmentby domestic industries. Five methods to more gradually liberalizequantitative restrictions are discussed: raising quota ceilingsuntil they are non-binding; eliminating quotas product by product;converting quotas to equivalent tariffs and then reducing them;auctioning quota licenses; and converting quotas to tariff quotas,and then liberalizing these. The various instruments are evaluatedaccording to their implications for the adjustment period, forgovernment revenue, for the balance of payments, and for theextent to which they are likely to produce political disruptions. |
