Quotas Nature And Purpose
Like tariffs import quotas are another protectionist device and an old form of trade restriction that came into existence since the mercantilist era.
An import quota implies a fixed quantity or value of a commodity that has been allowed to be imported in the country during a given period of time. In practice, quotas may be fixed either in terms of the physical volume or monetary value of imports may be fixed either in terms of the physical volume or monetary value of imports or a combination of the two. Further, the time period to which quotas apply varies from country to country the longest being a year and the shortest a month. Quotas assigned in quantitative terms are referred to as direct quotas and those expressed in value unties implying exchange control are called indirect quotas.
An import quota system has generally the following broad objective
1. To regulate imports in an effective manner.
2. To check imports in order to correct an adverse balance of payments.
3. To protect domestic industries from servers foreign competition.
4. To maintain and stabilize domestic price level by restricting import inflows.
5. To retaliate against countries resorting to restrictive devices like import quotas and to strengthen a country’s bargaining power by limiting import demand.
6. To check speculative imports in anticipation of tariff legislation through allocation of quotas.
Quotas, in fact, are recognized as an emergency device and to be very effective should be promptly enforceable. A quote system is, therefore, usually administered by the executive body rather than by parliamentary law.
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