You may have heard of quotas and wondered how they benefit domestic producers. Well, quotas are trade restrictions that limit the amount of a certain product imported into a country, as well as the monetary value of that product. They are similar to embargos, which are policies that limit the amount of goods that can be brought into a country. In this instance, however, quotas help domestic producers sell their goods at a lower price.
When put into place, quotas are usually used to limit unfair competition by foreign companies. They can also be used to protect domestic industries against unfair competition and dumping. A quota can also increase a country’s international bargaining power by preventing products from entering countries with low or zero quality. These quotas can also limit imports based on a country’s internal controls.