Import Quota - Other Effects

Other Effects

Domestic Employment: Decreasing imports and increasing domestic production also increases domestic employment.

Low Foreign Wages: Restricting imports produced by foreign workers who receive lower wages "levels the competitive playing field" compared to domestic goods produced by higher paid domestic workers.

Infant Industry: If foreign imports compete with a relatively young domestic industry that is neither mature enough nor large enough to benefit from economies of scale, then import quotas protect the "infant industry" while it matures and develops.

Unfair Trade: The foreign imports might be sold at lower prices in the domestic economy because foreign producers engage in unfair trade practices, such as "dumping" imports at prices below production cost. Import quotas seek to prevent foreign producers such activity.

National Security: Import quotas can also discourage imports and encourage domestic production of goods that are deemed critical to the security of the national economy.

Corruption: Import quotas can lead to administrative corruption in countries with import quotas as the importers chosen to meet the quota are the ones who can provide the most favors to the customs officers.

Smuggling: Import quotas are more likely to cause smuggling. It's likely that people will try to sneak the bats into the country illegally if the import quota is only a small fraction of the demand for the product. So governments have to set the import quota at a reasonable level.