On the Symmetry between Import and Export Quotas

Abstract

If a country wants to restrict its trade, it can use an import tax or an export tax. Their ef fects on the terms of trade and domestic relative prices are identical. This is Lerner's symmetry theorem. This paper attempts to show that Lerner's symmetry theorem also holds between import and export quotas if the foreign elasticity of demand for imports is elastic. If a country wants to restrict its trade, it can use an import tax or an export tax. Their effects on the terms of trade and domestic relative prices are identical. This is Lerner's symmetry theorem.1 purpose of this paper is to study if Lerner's symmetry theorem also holds between import and export quotes. It will be shown below that Ler ner's symmetry theorem also holds between import and export quotas if the foreign elasticity of demand for imports is elastic. offer curve approach will be used in this study. It is assumed that there are no inferior goods. In Figure 1, OA and OB are the offer curves of the home country A and the for eign country B, respectively. (Country B's elasticity of demand for imports is assumed to be elastic.) Point a is the equilibrium trading point under free trade. Now, suppose that country A would like to use an import quota or an export quota to restrict trade to point b. First, examine the case where import quota and export quota revenues are spent * Mr. Yeong-Her Yeh is Professor in the Departmant of Economics, University of Hawaii at Manoa, Honolulu, Hawaii 96822. He is a graduate of National Taiwan University and received his doctorate from the University of Minnesota in 1965. 1. A. P. Lerner, The Symmetry between Import and Export Taxes, Economica, August 1936, pp. 306-313 : J.E. Meade, A Geometry of International TYade, (1952, George Allen and Urwin), pp. 44-51 ; Jagdish N. Bhagwati and T.N. Srinivasan, Lecutures on International TYade (1983, MIT Press), pp. 108-111. This content downloaded from 207.46.13.166 on Thu, 07 Jul 2016 05:42:55 UTC All use subject to http://about.jstor.org/terms