What is a quota in international trade?

A quota in international trade refers to a limit on the amount of a specific good that can be imported or exported during a given time period. This mechanism is employed by governments to regulate the supply of particular products within their domestic markets, often to protect local industries from foreign competition or to manage trade balances. For example, a country may impose a quota on the import of textiles to support its local garment industry, ensuring that domestic producers remain competitive despite the availability of cheaper overseas products.

By setting these limits, governments can influence market prices, product availability, and the overall economic conditions of their nations. Quotas can be more restrictive than tariffs, as they directly cap the quantity of goods rather than just increasing their costs. This concept is fundamental to understanding how nations control trade flows and the implications these controls have on international relations and economic policies.