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What re Export Quotas?

2017-03-24T09:42:30+00:00

The term 'Export Quotas' is included in the Economics edition of the Financial Dictionary. Get yours now on amazon in ebook or paperback format. Read more here...

Export quotas represent a specific limit which a nation or block of nations establishes on the quantity of goods which may be legally exported in a given amount of time. They are also referred to as export controls. The main reason why a nation would set such a quota on its exports centers on optimizing the domestically available supply. This aids in controlling prices in the country and helps to ensure they remain lower. This practice is undoubtedly good for consumers, but it is not really beneficial for the national producers. In some cases it can have dramatic consequences on other countries, international buyers and producers, and multinational corporations.

Another way to define such export quotas is that they are restrictions on general or specific exports. Countries might choose to set exporting controls on nuclear materials or arms for the overall good of the country’s security. During a time of famine in the land, the state could impose controls on wheat, corn, or rice in order to stave off shortages of food.

These export quotas limit the numbers of exports for particular goods and technology. They do this by establishing a maximum possible value denomination or literal quantity of goods permitted in that particular export. There are various kinds of such quotas. These include bilateral quotas, global quotas, seasonal time frame quotas, quotas set according to the purchases of national goods, quotas which are linked up to the performance of exports, politically motivated quotas, and quotas or controls of important and secretive technologies and products.

India and China are two examples of nations which have historically (and in the case of China still very much do) impose export quotas. India has many times implemented maximum exports on textiles (including acrylic yarn, knitted fabrics, and cotton fabrics) and clothing (including sweaters, T-shirts, and gloves) which might be exported away to the European Union, Canada, and the United States.

China similarly employs such export quotas concerning its oil and rare earth metals production. For example, the country elected to reduce its 2017 first round of licenses for exports by 40 percent on the national four oil majors, Reuters reported. Traders were expecting the overseas oil allowances to be as high or higher than this past year’s record- high levels. The Ministry of Commerce along with the General Administration of Customs sets these export quotas. They determined that the four major state oil producers would only be permitted to sell 12.4 million tons (or about 91 million barrels) of jet fuel, oil, and gasoline abroad. This was reduced from 20.5 million tons for the identical export licensing first round of 2016.

In the appropriately named rare earth metals, China is jealous and aggressive with its export quotas. This is all the more dangerous because China mines over 95 percent of all rare earth metals in the globe. These critical metals are necessary to make electric cars, smart phones, numerous components of computers, and a variety of military armaments which are highly technology intensive. China also controls and produces over 99 percent of the rarest of the rare earth metals, known as heavy rare earths. These may only be deployed in tiny amounts for electronics and clean energy uses, yet they are still necessary for the production of these goods and technologies nonetheless.

There are consequences to these export quotas, in particular on the rare earth elements markets which have no alternative suppliers to turn to for their many important needs. Manufacturers of high-tech goods find themselves in dire straights when they can not obtain affordable supplies, or even supplies at any price, no matter how high. Beijing has tremendous power over the world technology manufacturers and producing nations thanks to these export quotas. They are able to simply stop the global supply of the rare earth metals whenever it suits their national agendas, goals, or international policies.

The term 'Export Quotas' is included in the Economics edition of the Financial Dictionary. You can get your copy on amazon in Kindle or Paperback version. See more details here.