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 within a designated time frame. Governments implement quotas to regulate the volume of trade, protect domestic industries, and control the supply of goods in the market. This tool can help maintain price stability and safeguard local jobs by restricting foreign competition.

By setting a specific numeric cap on imports or exports, quotas serve as a way to manage and balance international trade flows, ensuring that domestic production remains viable while still allowing for some level of foreign trade. Other options, such as taxes on imports, trade agreements, or penalties, reflect different aspects of international trade policy but do not accurately convey the definition or function of a quota.