Rusq.org Explains What Quota Means
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What is the definition of Quota?
- Translated according to a common English rule, Quota means “quota”, it means the maximum limit set by the State agency on the value or volume of goods that businesses are allowed to import. or exports in an authorized period, normally the period of application of the Quota (quota) is one year. In other words, Quota is the regulation of each country on the quantity limit of a certain item or group of goods allowed to be imported or exported from a certain market. for a certain period of time through licensing.
- Although it is understood as one of the state’s regulations in managing the amount of goods exported and imported by enterprises in order to ensure the quality of goods, the fact is that Quota’s legality It’s not high, it’s not transparent and it’s easy to be deformed
Quota (quota) will usually be classified into 2 main categories: export quota and import quota, import quota is the introduction of a restriction on the quantity of a certain number. For goods that are allowed to be imported, which can affect the domestic price of goods, import quotas have the same effect as import taxes, while export quotas are quotas. rarely used.
In addition, it is also classified into a number of other special quota categories. Among them can be mentioned as:
- Tariff Quota: means tariff quota, Tariff Quota is a norm that management agencies use to distinguish the tariff rate that each unit must pay based on the quantity of exported or imported goods. Tariff Quota is classified into two tax rates, the difference between the two rates is often quite high, in which:
- – High tax rates for the volume of goods exceeding the prescribed quota.
- – Low tax rate or 0% export tax for the volume of goods within the specified range of the quota (in this case, it is called a preferential tariff).
- International quota: means an international quota, International quota is a norm that management agencies use in industry associations to control the volume of an export item or group of goods of the member countries. members, and keep the price stable high of that commodity or group of goods on the international market, protecting the common interests of the members of the association.
But regardless of the type, the purpose of Quota is still not to bring revenue to the government or regulatory agencies, but Quota brings great profits to those who apply for the license. quota import permits. Quota (quota) can also cause a domestic enterprise to quickly become an exclusive distributor of that commodity for the whole market.
Nature of Quota (quota)
- In addition to being understood as a regulation of each country in controlling import and export goods into its market, Quota also plays a role as a driving force for each country to quickly promote its products. production and business activities of domestic enterprises, as well as helping to increase the surplus of enterprises and individuals producing such goods. However, a practical side that we also need to recognize is that making the number of imported goods smaller than the quantity of imports in Quota’s free trade is also one of the causes leading to the total income. The benefits in society will also decrease significantly, although the selling price of similar products in the domestic market will increase, the actual unit price of imported goods will not increase, causing a sharp decrease in domestic consumption demand.
- A quota system has an effect unlike a tariff in that it indicates in advance the quantity of goods to be imported or exported. Regulating the foreign trade economic system through tariffs will increase government revenue, but regulation by quotas only increases income for the business entity receiving the quota. However, in the current world economic situation, there is a tendency to liberalize trade and gradually remove tariff barriers, so in order to protect domestic production, governments often use a quota system. Quotas are an important tool to intervene to regulate the volume of imports and exports of a country, through quotas allowing the government to estimate relatively accurately the amount of imports and exports in each period. Meanwhile, through tariffs, the government cannot predict the volume of imports and exports because it changes depending on international market prices.
Conditions to apply Quota (quota)
Quota (quota) is not allowed to be used arbitrarily in any case, but the use of Quota (quota) where or how must be approved by the management of each country and both internationally, as well as specifically and clearly specified in current existing laws. In which, according to Article XI – CATT promulgated in 1994, it provides as follows:
Countries are not allowed to arbitrarily use Quota (quota) measures to avoid situations such as Quota (quota) not being transparent, Quota being distorted, and creating opportunities for negative problems to arise. …
For example, the fact that Quota (quota) has been changed into many names such as: specialized management, planned management, conditional management… is also one of the great opportunities that many individuals take advantage to profit and collect illicit taxes.
However, in Article XVIII – GATT issued in 1994, the International Trade Organization (WTO) also allows countries to apply Quota (quota) in special cases as follows:
– Countries are allowed to apply Quota (quota) to temporarily limit, overcome the severe shortage of the market for food, food or other essential necessities.
For example: Quota (quota) for exporting rice, wood, coal, …
- Countries are allowed to apply Quota (quota) in case to protect the external financial situation and balance of payments.
- Countries are allowed to apply Quota (quota) in case the market in that country is showing signs of heavy and serious deficits in matters such as monetary reserves, or the current stock of goods. too little and need to be replenished and raised the stock level of that item or group of goods in the most reasonable way
- In addition, in the case of developing countries, Quota (quota) can be applied in government assistance programs in economic promotion and development, or it can be restrict the import of goods to protect the stable development of some domestic industries.
In addition, Quota (quota) is also applied in the following cases:
- Quota (quota) for the purpose of protecting rare species of flora and fauna
- Quota (quota) for the purpose of protecting people’s health
- Quota (quota) for the purpose of protecting social morality
- Quota (quota) is for the purpose of exporting or importing items such as gold and silver, other assets that are specific to each country and related to the values of culture, art, history, archeology , or scarce natural resources.
But besides that permission, the Quota (quota) is also attached by the WTO with conditions that countries must fall in love with to meet.
- Countries must restrict the production or consumption of such goods or groups of goods in the domestic market.
- Countries are forced to make commitments that the use and change of their Quota levels will not affect the interests of members in other countries, and must also gradually relax the restrictions. This Quota level is set after the economy has changed and recovered, and completely removed to comply with the general principles of the WTO.
- Quota is not very legal and is only applied for a fixed time (usually it will be applied for a period of one year), so when applying Quota, countries need to quickly announce the application period and quick, specific Quota changes (if any).
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