What are quotas in international trade?

Quotas in international trade refer to limits placed on the quantity of a specific product that can be imported or exported during a given timeframe. They are established by countries to control the volume of trade and are often used to protect domestic industries from foreign competition. By setting quotas, governments can ensure that local markets remain stable and that domestic producers have fair access to the market.

This mechanism allows countries to manage their trade balances and influence the prices of goods within their own borders. The implementation of quotas can encourage local production, as fewer foreign products will be allowed in, potentially boosting local industries.

The other options focus on different aspects of trade: taxes on exports pertain to tariffs, which are different from quotas as they impose a cost rather than a volume limit; incentives for local production usually involve subsidies or tax breaks rather than quotas; and international agreements on pricing relate to trade agreements, which set terms for trade rather than limits on quantities. Thus, understanding quotas as limits on goods provides clarity on their role in the larger context of international trade.