An export quota is a quantitative restriction imposed on the value or volume of goods that may be exported from a country during a specified period.
Reasons for Implementing Export Quotas:
- Quotas curb excessive exports to safeguard domestic availability and inflationary pressures in essential commodities.
- They also allocate limited supplies between exporters and reduce competition when international supply exceeds demand.
Quota Administration:
- Export licenses must be obtained indicating eligibility under the quota allotment.
- Penalties confront smugglers evading quotas through mislabeling quantities.
Example:
By efficiently utilizing its rice export quota, the cooperative gained overseas market share and higher global market prices through bulk shipments closer to deadlines as allotments diminished.
Key Considerations:
While protecting local needs, export quotas distort trade flows and incentive efficiency through artificially constrained supplies in global markets. Alternatives include tariffs.