What is Import Quota?

The very essence of  Import is to bring in the goods and services into the periphery of a country where the buyer of  the very goods and services is called an importer. The importer is based in the country that  imports whereas the seller, who is based abroad the importing-country, is called an exporter.  An import can be considered to be a commodity or a service brought in a legitimate fashion, to be used in trade, from one country to another. Thus, it is a good that is brought in a particular country  from another country for sale. The goods that are imported are provided to domestic consumers who pay for them by foreign producers. The country that receives is called an Importing country and the one that sends is called an Exporting country.

The amalgam of  Import and Export constitutes the International Trade.  Import of goods normally requires involvement of the customs authorities in the country of import as well as the country of export and is often subjected to import-restrictions like  import quotas, tariffs, and trade agreements.

Import Quota

It is a limit on the quantity of a good or services that can be imported.  It is simply a protectionist trade restriction to set a physical limit on the quantity of  good that can be imported into a country in a given period of time. A less quantity(or permitted level) will be imported if a quota is imposed on a good.  Essentially, quota is used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy.

The main focus of import quota is shorten the imports and augment the domestic production of a good, service, or activity. It therefore protects the  domestic production by restricting foreign competition.When the quantity of imported goods is limited due to the import quota, the price of imported goods increases. As a result, the consumers prefer domestic products to foreign ones. A quota is imposed by the domestic government to impose a certain restriction on the quantity of goods imported.

Quintessential Effects

1. Imposing a limit on imports and increasing domestic production enhances domestic employment.

2. Foreign workers receive lower wages as compared to the domestic workers. Thus, restricting imports that are produced by foreign workers will level the competitive playing field.

3. An industry that is neither mature enough nor large enough to benefit from economies of scale is called infant industry. If import quota is not imposed, the foreign imports will compete with the very infant industry and thereby, challenge their growth.

4. The foreign imports might be sold at lower prices in the domestic economy because foreign producers engage in unfair trade practices. Thus, import quotas seek to prevent foreign producers such activity.

Disadvantages

1. Import quotas can lead to administrative corruption in countries with import quotas as the importers chosen to meet the quota are the ones who can provide the most favors to the customs officers.

2. People may try to keep the goods in reserve (called JAMAKHORI or KAALA BAZAARI). Thus, import quotas are more likely to cause smuggling.  So governments have to set the import quota at a reasonable level.

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