An import quota is a quantitative restriction imposed on the value or quantity of goods that may be imported into a country over a specified period, usually one year.
Types of Quotas:
- Tariff quotas permit imports up to a certain quantity at low tariffs, and levy high tariffs above that limit.
- Bilateral quotas govern the total imports allowed from specific trading partners.
Objectives of Quotas:
- Protect domestic industries from foreign competition.
- Support politically influential sectors facing surges in cheap imports.
- Guarantee a minimum market share for domestic goods.
Example Impact:
By lowering import quotas on finished clothing while raising quotas on fabric and yarn, the government incentivized creation of domestic manufacturing jobs rather than retail positions.
Debates Around Quotas:
Quotas are more trade restrictive than tariffs but can satisfy powerful special interests. Critics argue they distort free markets and global supply chains at the cost of efficient resource allocation and higher prices for consumers.