Import quotas define the maximum quantity of a product that can be imported based on factors such as weight, unit numbers, etc. The impact on domestic prices is therefore difficult to predict. There are several procedures for allocating quotas. For example, governments can sell or auction licences or issue them to enterprises or foreign governments on the basis of historical or preferential agreements.
In bilateral and regional trade agreements, quota licences can be issued to partner countries to strengthen regional integration. This enables regional partners to export on better terms than other countries.
Unlike import taxes or import duties, import quotas are prohibited in the WTO, as are all other import bans or restrictions (see GATT 1947: Article XI: 1). They are only allowed in certain exceptional cases. These include, for example
- Import restrictions "necessary to the application of standards or regulations for the classification, grading or marketing of commodities in international trade" (Article XI: 2 b),
- Import restrictions on any agricultural or fisheries product, imported in any form, necessary to the enforcement of certain governmental measures (Article XI: 2 c),
- in the case of expected negative effects on the balance of payments (Article XII),
- under certain exceptional circumstances (Article XX), and
- in case of a threat to national security (Article XXI).
Tariff quotas are an alternative that combines import quotas and import duties. These allow developing countries to apply low tariffs to a certain quantity of imports, with higher tariffs for imports exceeding a critical import volume. Another alternative for limiting imports is the simple duty. However, it is harder to determine precise import volumes with this duty.
- A properly functioning country-wide administration and monitoring system with access to the relevant information and sufficient technical and human capacities for its design, implementation and monitoring
- Clear and coherent political strategy and targets for policy-makers and public authorities
- Compatible regional and world trade law (WTO conformity)
- Constant market surveying and forecasting
- Close cooperation and knowledge sharing with research institutions
- Efficient customs administration
- Market price information systems
Possible Negative Effects
- Higher prices for consumers and higher costs for processors
- Lack of efficiency and transparency and corruption in issuing licences (nepotism)