Study Guide
Main Idea
Tariffs and quotas are two restrictions on
international trade. 
Reading Strategy
Graphic Organizer As you read the section,
complete a graphic organizer similar to the one
on page 472 of your textbook by describing the
differences between a tariff and a quota.
1
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information. Section 2 begins on page 472 of your textbook.
Study Guide (cont.)
Objectives
After studying this section, you will be able to: 
– Explain how international trade can be
restricted to protect special interests. 
– Cite the main argument used in support of
protection. 
– Relate the history of the free trade movement. 
Applying Economic Concepts
Quotas Do you think the prices of some goods
are too high? How can international trade help
keep some prices low?
Click the Speaker button to listen
to the Cover Story.
2
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information. Section 2 begins on page 472 of your textbook.
Introduction
• Although international trade can bring many
benefits, some people object to it because
it can displace selected industries and
groups of workers in the United States. 
• The European ban on American hormonetreated beef is just one example of
attempts to restrict trade.
3
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Restricting International Trade
• Two major ways of restricting trade are
through a tariff, or tax placed on imports,
and a quota, a limit on the quantities of a
product that can be imported. 
• A protective tariff is one that is high
enough to protect less efficient domestic
industries. 
• A revenue tariff is one high enough to
generate revenue.
4
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Restricting International Trade (cont.)
• Most quotas are used to reduce the
supply of a product and keep prices high
for domestic producers. 
• Other barriers to trade include overly
rigorous health inspections and difficult
licensing requirements.
5
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Arguments for Protection
• Protectionists are people who favor trade
barriers that protect domestic industries
and offer various arguments to defend their
position. 
• According to one argument, a country could
become so specialized that it would end up
being dependent enough on other countries
that it would affect national defense. 
• The infant-industries argument is the belief
that new industries should be protected
from foreign competition.
6
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Arguments for Protection (cont.)
• Some argue that tariffs and quotas protect
domestic jobs form cheap foreign labor. 
• The argument for keeping the money at
home claims that limiting imports will keep
American money in the United States. 
• The balance of payments argument
suggests that protection would keep down
the difference between the money a
country pays to and what it receives from
other nations.
7
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The Free Trade Movement
• Trade barriers work only if other countries
do not retaliate, causing all countries to
suffer. 
• Restrictive legislation in the past nearly
halted international trade. 
• Various trade agreements have allowed
countries to reduce tariffs in cooperation
with other nations. 
• The World Trade Organization (WTO) and
the North American Free Trade Agreement
(NAFTA) are examples of international
agencies for promoting freer trade.
8
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Section Close
What are the benefits and costs of
NAFTA?
9
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