An import quota is a type of 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 are typically used to benefit the producers of a good in that economy, which is known as protectionism. The quota share is a specified number or percentage of the allotment as a whole quota, that is prescribed to each individual entity.
There are two types of import quotas: absolute and tariff rate. Absolute quotas strictly limit the quantity of goods that may enter the commerce of the United States for a specific period, while tariff rate quotas permit a specified quantity of imported merchandise to be entered at a reduced rate of duty during the quota period. Once the tariff-rate quota limit is reached, goods may still be entered, but at a higher rate of duty. Some quotas are global while others allocate specified quantities to designated foreign countries.
Import quotas are put in place to protect domestic industries and vulnerable producers. Quotas prevent a country’s domestic market from becoming flooded with foreign goods, which are often cheaper due to lower production costs overseas. Certain foreign manufacturers may purposely try to drive domestic producers out of business by selling large quantities of a product at below cost, thus capturing the entire domestic market and crippling local vendors. However, quotas are generally harmful to consumers since they prevent them from accessing goods that are more competitively priced than local alternatives.
