protectionism - import quotas

Question 1

what is an import quota? and what is the aim

Answer 1

an annual limit on the quantity of a good imported into a country
- aim = increase the share of the market available for domestic products

Question 2

why are import quotas imposed?

Answer 2

• enables predictable import levels from others
• restrict dumping
• protect a key domestic industry e.g. agriculture

Question 3

what is the impact of import quotas on domestic businesses?

Answer 3

• enables them to take a greater share of the market
• stops prices from being forced down by excess supply

Question 4

what is the impact of an import quota on foreign businesses?

Answer 4

• loss of market share
• loss of revenue/profitability

Question 5

advantages of import quotas

Answer 5

• face less foreign competition
• shareholder who own companies protected by quotas = bigger dividends
• job creation and security
• stronger domestic growth GDP = as customers have no choice but to buy domestic products
• better trade balance = much easier to predict than. tariffs
• quotas are seen as less confrontational than tariffs

Question 6

disadvantages of import quotas

Answer 6

• restricts customer choice
• unlike tariffs don’t generate additional income
• hard to decide on the appropriate quota level
• creates reliance on quota = inefficient businesses
• retaliatory quotas = reducing trading opportunities for all