An import quota is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. Quotas, like other trade restrictions, are typically used to benefit the producers of a good at the expense of consumers in that economy. Quotas are considered to be less economically efficient than tariffs, which in turn are less economically efficient than free trade.
Quotas
are usually set by government or by an organization of producers of a
particular product. For trade quotas, governments set the quota limiting the
import of a particular product, restricting the access to the domestic market
by an offshore producer, and giving the domestic producers the opportunity to
improve their position in the market.
Such protectionist policies in industries including steel, autos, and
many consumer electronics products, have protected domestic industry from
international competition. In production quotas, a government or a group of
producers, limit the supply of a particular product in order to maintain a
certain price level. For example, the
Organization of Petroleum Exporting Countries sets a production quota for crude
oil in order to "maintain" the price of crude oil in world markets.
