International Trade Theory and Policy
by Steven M. Suranovic
Import quotas are limitations on the quantity of goods that can be imported into the country during a specified period of time. An import quota is typically set below the free trade level of imports. In this case it is called a binding quota. If a quota is set at or above the free trade level of imports then it is referred to as a non-binding quota. Goods that are illegal within a country effectively have a quota set equal to zero. Thus many countries have a zero quota on narcotics and other illicit drugs.
There are two basic types of quotas: absolute quotas and tariff-rate quotas. Absolute quotas limit the quantity of imports to a specified level during a specified period of time. Sometimes these quotas are set globally and thus affect all imports while sometimes they are set only against specified countries. Absolute quotas are generally administered on a first-come first-served basis. For this reason, many quotas are filled shortly after the opening of the quota period. Tariff-rate quotas allow a specified quantity of goods to be imported at a reduced tariff rate during the specified quota period.
In the US in 1996, milk, cream, brooms, ethyl alcohol, anchovies, tuna, olives and durum wheat were subject to tariff-rate quotas. Other quotas exist on peanuts, cotton, sugar and syrup.
In the US most quotas are administered the US Customs Service. The exceptions include dairy products, administered by the Department of Agriculture, and watches and watch movements, administered by the Departments of the Interior and the Commerce Department.
International Trade Theory and Policy - Chapter 10-2: Last Updated on 6/13/06