Quotas
Economy Saver or Economy Killer?
The Basics About Quotas
Simply put, a quota is a set limit on the import, export, or production of a certain product. For instance, countries put production quotas on their products to save their resources, and there fore, their money. However, some countries and organizations, such as the World Trade Organization, are against quotas, because they can limit how much money smaller and less developed nations can make.
Quotas and surplus
(Hingston, 2010).
Examples of Import, Export, and Production Quotas
There are oil export quotas in Middle Eastern countries that are part of the Organization of the Petroleum Exporting Countries. They limit oil exports to 30 million barrels a day (OPEC Ministers Agree to Maintain Output Quota, 2014).
The United States has quotas on sugar, dairy products, and even brooms (Commodities Subject to Import Quotas, 2014).
(Hermann, 2007)
The United States has a sugar export quota to Brazil of 155,364 tons for 14606 US cents/kg (U.S. Sugar Policy, 2014).
The United States has a sugar export quota to Brazil of 155,364 tons for 14606 US cents/kg (U.S. Sugar Policy, 2014).
(Yot, 2007)
The U.S. established the Mandatory Oil Import Program (MOIP) in 1959, which further limited the amount of oil the U.S. imports from the rest of the world.
The U.S. established the Mandatory Oil Import Program (MOIP) in 1959, which further limited the amount of oil the U.S. imports from the rest of the world.
(Zell, 2010)
The European Community recently extended the longevity of its production quota on milk. It was originally supposed to only last until 1989 (The Milk Quota Scheme, 2014).
The European Community recently extended the longevity of its production quota on milk. It was originally supposed to only last until 1989 (The Milk Quota Scheme, 2014).
Opposing Viewpoints
Support of Quotas
Quotas are usually supported by a few different reasons. One is to increase domestic employment by encouraging more production. Another reason is to fight unfair trade practices, such as "dumping," which is the term for selling a product to a foreign buyer for a lower price than their domestic sales, often selling them below production price. Countries also place import quotas on goods that are said to be critical to the security of a country's economy (The Why of Import Quotas, 2000-2014).
Opposition of Quotas
The main organization who fights against quotas is the World Trade Organization. One piece of their mission statement says that they fight quotas around the world in order to make the global economy more open by breaking down barriers, such as quotas. Another goal of the WTO is to help less developed countries to gain more benefits from the global economy. The elimination of quotas can lead to this because less developed countries don't have as good of a chance to get into the global market. This is due to large, more developed economies to sell their products for less because their products are doing better on the global market (What We Stand For, 2014).
Impact/Relevance of the Debate
Quotas in the global market are an extremely important topic because they can either save a market or make it fall under. On the positive side, setting quotas do well with saving agricultural and defense industries from falling under. However, quotas create chain reactions throughout the global market. If one large economy sets a quota on a product, then other economies are usually soon to follow on setting quotas on the same products, which has the potential to make the market of a certain product fail (The Disadvantages of Tariffs and Quotas, 2014).