What is an Import Quota?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 30 May 2020
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An import quota is a protective measure that sets a fixed quota or limit on the number of units of a specific good that may be imported within a specified period of time. A quota of this type is designed to help to maintain an equitable balance in the marketplace, allowing domestic producers to compete with producers who manufacture the goods outside the country. Critics tend to see the import quota doing more harm than good, claiming that the limit leads to the production of sub-standard goods that are smuggled into the country illegally, and that provide domestic businesses with an unfair advantage in the marketplace.

In many situations, the import quota is set at a limit that is slightly less than what is known as free trade. Free trade is a situation where the international trade of goods is not subject to government intervention, and relies on demand to determine the rate of imports and exports related to a specific product. When the quota is below free trade levels, it is known as a binding quota, since it effectively binds the ability to import goods over a certain number for a period of time. When the import quota is equal to or higher than the current free trade, it is known as a non-binding quota, since it allows for imports based on both current demand and the projections of future demand.

Proponents of the import quota feel this approach is necessary in order to protect the economy of the nation receiving the goods. Placing limits makes it possible for part of the demand for those goods to be met by products produced within the country, a move that helps to ensure jobs are provided for citizens who are engaged in the production of those goods. At the same time, the measure helps to prevent domestic or imported goods from overpowering the consumer market, and ensures that consumers have several options on which products to purchase.

Critics feel that the need for an import quota to protect the interests of consumers is unnecessary. Limiting the quantity of goods imported has the potential to limit consumer options, rather than expand them. In addition, the limits may actually have a negative impact on the economy, since consumers may pay a higher price for the readily available domestic products and thus be unable to afford other types of products that they would otherwise buy.

While there is disagreement on the effectiveness of the import quota, there is often agreement on how the quota compares to the application of tariff rate surcharges on imports. Typically, the tariff is seen as a more efficient way to place limits on the inflow of international goods without placing undue hardship on producers who import goods. For many, tariffs represent the best solution when it comes to maintaining a healthy economy, providing consumers with a variety of purchase options, and in promoting healthy competition among suppliers.

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