Quotas as Trade Barriers:

A quota is a type of trade barrier where the government places a limit on the number of goods that can be imported. Using the example of Chinese toys, if the Indian government imposes a quota, it would restrict the quantity of Chinese toys entering the Indian market. This would reduce the availability of imported toys, thereby protecting domestic toy-makers from foreign competition.

With fewer Chinese toys available, Indian consumers would turn to locally made toys. This would allow the domestic toy industry to prosper, as they would face less competition from cheaper imports.

Should Quotas be Used?

After Independence, the Indian government had put barriers to foreign trade to protect producers within the country. Industries were just coming up in the 1950s and 1960s, and competition from imports would not have allowed these industries to develop. All developed countries during their early stages gave protection to domestic producers.

However, since 1991, India moved towards liberalisation. The government felt that competition would improve the performance and quality of Indian producers. The WTO also advocates for free trade with no barriers.

Yet, it is seen that developed countries have unfairly retained trade barriers while forcing developing countries to remove theirs. Therefore, quotas may be justified for developing countries to protect their industries until fair trade practices are ensured globally.