Voluntary export restraints
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A voluntary export restraint (VER) or voluntary export restriction is a government imposed limit on the quantity of goods that can be exported out of another country during a specified period of time.
Typically VERs arise when the import-competing industries seek protection from a surge of imports from particular exporting countries. VERs are then offered by the exporter to appease the importing country and to deter the other party from imposing even more explicit (and less flexible) trade barriers.
Also, VERs are typically implemented on a bilateral basis, that is, on exports from one exporter to one importing country. VERs have been used since the 1930s at least, and have been applied to products ranging from textiles and footwear to steel, machine tools and automobiles. They became a popular form of protection during the 1980s, perhaps in part because they did not violate countries' agreements under the GATT. As a result of the Uruguay round of the General Agreement on Tariffs and Trade (GATT), completed in 1994, World Trade Organization (WTO) members agreed not to implement any new VERs and to phase out any existing VERs over a four-year period. Exceptions can be granted for one sector in each importing country.
Some examples of VERs occurred with auto exports from Japan in the early 1980s and with textile exports in the 1950s and 1960s.
1981 Automobile VER
When the automobile industry in the United States was threatened by the popularity of cheaper more fuel efficient Japanese cars, a 1981 voluntary restraint agreement limited the Japanese to exporting 1.68 million cars to the U.S. annually as stipulated by U.S Government. This quota was originally meant to expire after three years, in April 1984. However, with a growing trade deficit vis-à-vis Japan and under pressure from domestic manufacturers, the US government saw fit to extend the quotas for an additional year. The cap was raised to 1.85 millions cars for this additional year, then to 2.3 million for 1985. The voluntary restraint was only finally removed in 1994.
The Japanese automobile industry responded by establishing assembly plants or "transplants" in the United States (primarily in the Southern U.S. states where right-to-work laws exist as opposed to the Rust Belt states with established labor unions) to produce mass market vehicles. Some Japanese manufacturers who had their transplant assembly factories in the Rust Belt e.g. Mazda, Mitsubishi had to have a joint venture with a Big Three manufacturer (Chrysler/Mitsubishi which became Diamond Star Motors, Ford/Mazda that evolved into AutoAlliance National). GM established NUMMI which was initially a joint venture with Toyota which later expanded to include Isuzu, Suzuki which later became the Geo division. They also began exporting bigger, more expensive cars (soon under their newly formed luxury brands like Acura, Lexus, and Infiniti) in order to make more money from a limited number of cars.
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