UK Accounting Glossary
In Economics, a quota is a government-imposed trade restriction that limits the number or monetary value of goods that a country can import or export during a particular period. Countries use quotas in international trade to help regulate the volume of trade between them and other countries.
An important aspect of economics is the import quota which limits the maximum quantity of import each year. Import licenses, that are sold or allocated directly to individuals or enterprises in the national or foreign market, are used to administer import quota. Import quota may be bilateral, global or by country.
A quota is used as an economic tool to keep the inflow of foreign products under control. In the domain of international trade, quantitative restrictions like trade quotas prove to be of great use in restricting entry of foreign commodities into the domestic market of the home country. Like a tariff, ta rade quota acts as a barrier to the free flow of goods and services across national boundaries of the countries involved in bilateral or multilateral trade.
However, there has been a sea change in international trade scenario in recent times. Globalization has prompted a number of countries across the world to go for open trade policies. As a part of the trade liberalization initiatives, there has been significant reduction and/or elimination of import quotas in different countries involved in international trade.
There is no denying that reduction of quantitative restrictions like import quotas, has facilitated international trade activities to a great extent.
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This glossary post was last updated: 7th January 2020.