Handbook on International Trade Policy
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Handbook on International Trade Policy

Edited by William A. Kerr and James D. Gaisford

The Handbook on International Trade Policy is an insightful and comprehensive reference tool focusing on trade policy issues in the era of globalization. Each specially commissioned chapter deals with important international trade issues, discusses the current literature on the subject, and explores major controversies. The Handbook also directs the interested reader to further sources of information.
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Chapter 24: Quota Administration

David Skully


David Skully Introduction Quota administration concerns how the rights to import within a quota are distributed. Quota administration is fundamentally a rationing problem. There are many ways to ration, some are more efficient than others. There are three general types of quota administration: market-based or auction allocation, rule-based allocation, and discretionary allocation. This chapter first considers the superior efficiency of market-based allocation; that is, rationing a fixed supply among competing demands by market-determined prices, either auction bids or market-clearing prices. Market allocation provides the benchmark against which to evaluate other allocation methods. Rule-based methods can be reduced to algorithms. The most common rule-based systems are license on demand and first-come-first-served. Historical allocation, in which quota rights are allocated based on some characteristic in an ‘historical’ base period, for example, a country’s average market share in a given three-year period, is a rule-based system; but it has a discretionary element because one must choose among characteristics, base periods, and averaging methods. Discretionary methods cannot be reduced to rules or algorithms. In such a system the quota administrator is not constrained to follow an explicit (or, at any rate publicly available) rule. The allocation can be arbitrary. Often discretionary allocation involves the government of the importing country granting quota administration powers to some private or non-governmental organization. Finally, it should be noted that quotas are sometimes not enforced. The standard treatment of a quota is a trade restriction imposed unilaterally by the government of the importing country that prevents...

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