The choice between Import Tariffs and Quotas

From what we have learned earlier, we know that even though countries benefit as a whole in international trade, there are still winners and losers since the gain from trade is unevenly spread. That is why government need to do something to influence the amount of international trade—to help the losers limit their losses. As we have discussed in class, government usually use these trade policies, which includes the use of import tariffs (taxes on imports), import quotas (quantity limits on imports), and subsidies for exports.
Tariff and quota both serve the propose to provide protection to domestic import-competing industries. but why tariffs seems like it is more preferable to quotas? The choice between one or the other is likely to depend on several concerns, which, according to the article, are revenue effects, administrative cost and the protective effect.
In term of revenue effects, tariffs will automatically generate tariff revenue and has a immediate advantage for government while quotas may or may not generate revenue depending on how the quotas is administered. The Progressive Policy Institute has found that the United States collects 20 billion dollars a year in tariff revenue. This is revenue that would be lost to the government unless their import quota system charged a licencing fee on importers.The administrative costs of tariffs and quotas are likely to differ too, though it is not obvious which of these two would be less costly.
Perhaps the most important distinction between the two policies is the protective effect, quotas are more protective because they limit the extent of import competition to a fixed maximum quantity. In contrast, tariffs simply raise the price but do not limit the degree of competition or trade volume to any particular level, which means that it has more market flexibility.

So why GATT has a preference for the the application of tariffs rather than quotas as a guiding principle? One reason was tariffs could be expected to be less protective over time. Another reason concerned transparency.

With a quota in place, it is very difficult to discern the degree to which a market is protected, however, with a tariff in place, one can use the tariff percentage as a measure of the degree of protection. Besides, it was considered somewhat easier to negotiate reductions in tariff rates than quota increases during GATT rounds of trade liberalization. Trade liberalization agreements generally target a fixed percentage for tariff reductions. For example, countries might agree to reduce average tariffs by 30 percent from their current levels. This rule would be perceived as being equal reciprocation in that each country would be liberalizing to the same degree. Hence the agreement could be judged to be fair. However, with quotas in place, it would be difficult, if not impossible, to apply such a straightforward type of fairness principle.

For this reason, current WTO member countries agreed to phase out the use of quotas in the Uruguay Round. Instead, countries will apply tariffs that are equivalent in their market effects to the original quotas. This adjustment is referred to as tariffication. In this way, future rounds of trade liberalization negotiations will be able to use fair reciprocal concessions to bring these tariffs down further.