Benefits of Quotas
A quota is described as a kind of trade restriction imposed to limit the movement of a certain amount of goods imported in a particular period of time. Just like other trading barriers, quotas benefits producers in that country and restrict consumer’s choice. Although critics say that quotas typically lead to bribes in order to acquire quota allocation, they do provide a number of perks for domestic producers. Listed below are some of the benefits of imposing quotas in trade.
1. Boosts local investment
While they are considered less economically than tariffs, quotas play an essential role in trade as they put a limit on goods that are imported in a country, creating shortages that cause price fluctuations. Although quotas work in a similar manner as tariffs, the additional cash often benefits foreign producers and not the local government.
2. Protects local companies
The basic principle behind imposing quotas in trade is to restrict the movement of goods from foreign countries in the hopes of protecting local firms from take-overs. In addition to that, some governments offer loans and subsidies to companies that lack the resources to compete with foreign competitors. Some people however believe that this move is geared towards promoting anti-globalization.
3. Creates more job opportunities
When a company is on the way of growing strong to compete with other foreign companies, quotas help safeguards it from stiff competition. As a result, this creates more job opportunities local workers.
4. Goods become less expensive
Through quotas and protectionism, the prices of imported goods become inexpensive so that people opt to buy local goods. This way, the government can still get a steady source of revenue, which improves the economy in the process.
Consumers always pay high prices for domestic products when producers increase prices due to lack of competition. In other words, lack of competition can lead to exploitation.