Also found in: Financial.
Import quotas are a form of protectionism. An import quota fixes the quantity of a particular good that foreign producers may bring into a country over a specific period, usually a year. The U.S. government imposes quotas to protect domestic industries from foreign competition. Import quotas are usually justified as a means of protecting workers who otherwise might be laid off. They also can raise prices for the consumer by reducing the amount of cheaper, foreign-made goods imported and thus reducing competition for domestic industries of the same goods.
The General Agreement on Tariffs and Trade (GATT) (61 Stat. A3, T.I.A.S. No. 1700, 55 U.N.T.S. 187), which was opened for signatures on October 30, 1947, is the principal international multilateral agreement regulating world trade. GATT members were required to sign the Protocol of Provisions Application of the General Agreement on Tariffs and Trades (61 Stat. A2051, T.I.A.S. No. 1700, 55 U.N.T.S. 308). The Protocol of Provisions set forth the rules governing GATT and it also governs import quotas. This agreement became effective January 1, 1948, and the United States is still bound by it. GATT has been renegotiated seven times since its inception; the most recent version became effective July 1, 1995, with 123 signatories.
Import quotas once played a much greater role in global trade, but the 1995 renegotiation of GATT has made it increasingly difficult for a country to introduce them. Nations can no longer impose temporary quotas to offset surges in imports from foreign markets. Furthermore, an import quota that is introduced to protect a domestic industry from foreign imports is limited to at least the average import of the same goods over the last three years. In addition, the 1995 GATT agreement identifies the country of an import's origin in order to prevent countries from exporting goods to another nation through a third nation that does not have the same import quotas. GATT also requires that all import quota trade barriers be converted into tariff equivalents. Therefore, although a nation cannot seek to deter trade by imposing Arbitrary import quotas, it may increase the tariffs associated with a particular import.
In the United States, the decade from the mid-1980s to the mid-1990s saw import quotas placed on textiles, agricultural products, automobiles, sugar, beef, bananas, and even under-wear—among other things. In a single session of Congress in 1985, more than three hundred protectionist bills were introduced as U.S. industries began voicing concern over foreign competition.
Many U.S. companies headquartered in the United States rely on manufacturing facilities outside of the country to produce their goods. Because of import quotas, some of these companies cannot get their own products back into the United States. While such companies lobby Congress to change what they consider to be an unfair practice, their opposition argues that this is the price to be paid for giving away U.S. jobs to foreign countries.
Nearly every country restricts imports of foreign goods. For example, in 1996—even after the new version of GATT went into effect—Vietnam restricted the amount of cement, fertilizer, and fuel and the number of automobiles and motorcycles it would import. The import quotas of foreign countries can adversely affect U.S. industries that try to sell their goods abroad. The U.S. economy has suffered because of foreign import quotas on canned fruit, cigarettes, leather, insurance, and computers. In a market that has become overcrowded with U.S. entertainment, the European Communities have chosen to enforce import quotas on U.S.-made films and television in an effort to encourage Europe's own industries to become more competitive.
Benenson, Bob. 1994. "Free Trade Carries the Day as GATT Easily Passes." Congressional Quarterly Weekly Report 52 (November 26).
Prepared testimony of Allan I. Mendelowitz. 1995. Federal News Service, congressional hearings testimony (June 14).
"Provisions: GATT Implementing Bill." 1994. Congressional Quarterly Weekly Report 52 (November 26).
Reinke, John J. 1985–86. "An Analysis of the Conflicts between Congressional Import Quotas and the General Agreement on Tariffs and Trade." Fordham International Law Journal 9.