1. Introduction Methods of fixing import Quotas Objectives of import Quota system Types of import Quotas Effects of Import Quota fixation Import Quotas and Tariffs : A Comparison

2. An import quota is a limit on the quantity of a good that can be produced abroad and sold domestically. It is a type of protectionist 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. 3. Government of India may permit import of watches from japan either specifying the number of watches, say one million watches per year, or specifying the value of watches to be imported from japan(say Rs.25 crores per year) 4. Assuming that Govt. of India has decided to import watches from Japan at Rs 25 cr per year. 5. 1. Govt. may give import licence to import Japanese watches value at Rs 25cr per year to the highest bidder in an open market or by calling for tenders , the highest bidder getting the necessary import licence. 2. Govt. may give the required licence on the basis of first come firstserved, each importer being permitted to import watches up to a specified amount, all such import licences given to the one or more importer among the traditional importers of watches totalling Rs 25cr per year 6. 3. Govt. may limit import of Japanese watches by make available to importers foreign currency that is just enough to import Japanese watches of the total value of Rs 25cr per year. 4. Govt. agency as for example The state trading corporation may be given the required licence to import japanese watches of the total value of Rs 25cr per year. 7. To provide protection and help development of domestic industry by restraining imports and thus restricting foreign competition. To influence pattern if living of people especially of the elite classes in developing countries by reducing imports of luxury and semi-luxury goods and services. 8. Reduce imports and increase domestic production of a goods, service, or activity. As the quantity of importing the good is restricted, the price of the imported good increases, thus encourages consumers to purchase more domestic products. 9. To "protect" domestic production by restricting foreign competition In general, a quota is simply a legal quantity restriction placed on a goods imported that is imposed by the domestic government. 10. Bilateral Quota Agreement: Under this system, a country can negotiate with each country separately and fix import quotas. 11. Unilateral Quota Fixation: Under this system, import quota of a particular commodity from a particular country is fixed by law or decree by the importing country without any negotiation or agreement with the other or countries. 12. These unilaterally fixed import quotas may be broadly of two types. a. Global Quota system : The full amount of the quota fixed may be imported by the quota fixing country from any one country. b. Allocated Quota System: The full amount of the quota fixed is allocated or distributed among several countries. 13. Tariff Quota Fixation System : Under this system a predetermined quantity of a commodity is permitted to be imported either free (ie. Without paying any import duty) or on payment of import duty that is relatively low. But import of the commodity beyond such a fixed quota is charged a relatively high import duty. 14. Mixing quota system: Under this system the quota fixing country insists that domestic producer of a certain specified commodity use imported raw material in a certain fixed proportion along with domestically produced raw material while producing the commodity 15. Domestic Employment: Decreasing imports and increasing domestic production also increases domestic employment. Infant Industry: If foreign imports compete with a relatively young domestic industry that is neither mature enough nor large enough to benefit from economies of scale, then import quotas protect the "infant industry" while it matures and develops. 16. National Security: Import quotas can also discourage imports and encourage domestic production of goods that are deemed critical to the security of the national economy. Corruption: Import quotas can lead to administrative corruption in countries with import quotas as the importers chosen to meet the quota are the ones who can provide the most favors to the officers. 17. Smuggling: Import quotas are more likely to cause smuggling. It's likely that people will try to sneak the bats into the country illegally if the import quota is only a small fraction of the demand for the product. So governments have to set the import quota at a reasonable level. Price effect: The price of imported commodity comparatively high. 18. Redistributive Effect: Higher profits for the domestic sellers and domestic manufactures. This fixation of import quota may makes consumers lose and their loss becomes the gains of domestic producers. Consumption Effect: The consumption of imported goods comparatively low, because high price for the product 19. 1.The policy of import quota fixation brings speedier and also definite quantitative results but tariff fixation not speedier & take time to determine import duty. 2. Import quota fixation has direct and immediate effect on the quantity of import of the concerned commodity. Tariff policy does not directly control the quantity of the imported commodity 20. 3.Import quota is generally fixed by an executive decree of the govt. but tariff duty is imposed after passing due legislation which is debated in the lagislature. 21. 5. Quota fixation is not based on any single scientific principle and can, therefore, be highly discriminatory, political factor playing a notable role in such discrimination. In the case of tariff, there is less scope for discrimination from country to country. It generally operates on the general plane and without discrimination. 6. Imposition of an import duty benefits the govt. as it brings revenue to the govt. gains of import quota fixation would go to the licence holder in the country. 22. It may be concluded that whether the govt. should adopt the policy of import quota fixation or imposing import duty will depend upon a number of factors operating in the country. 23. International Business -Alan M Rugman, Donald J Lecrew, Laurence D Booth -McGRAW-HILL Book company -Newyork,1986,pg no. 66-68 International Marketing -PK Vasudeva -Excel Books,New delhi,2006, pg no. 95-100 International Business -Justin Paul -Prentice Hall of India Pvt Ltd,New delhi,2005