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.

Characteristics[edit]

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[edit]

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.[1] 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.[2] 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.[3]

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 International). GM established NUMMI which was initially a joint venture with Toyota which later expanded to include a Canadian subsidiary (CAMI)) - a GM/Suzuki which were consolidated that evolved into the Geo division in the U.S. (its Canadian counterparts Passport and Asuna were short lived - Isuzu automobiles manufactured during this era were sold as captive imports). The Japanese Big Three (Honda, Toyota, and Nissan) 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.

References[edit]

  1. ^ Itō, Takatoshi. 1992. The Japanese Economy. MIT Press. 370
  2. ^ Schuon, Marshall (1984-11-25). "About Cars; Chevrolet's Trio Challenge Imports". The New York Times. 
  3. ^ Benjamin, Daniel K. (September 1999). "Voluntary Export Restraints on Automobiles". PERC Reports: Volume 17, No. 3. Property & Environment Research Center. Retrieved 2008-11-18. In May 1981, with the American auto industry mired in recession, Japanese car makers agreed to limit exports of passenger cars to the United States. This "voluntary export restraint" (VER) program, initially supported by the Reagan administration, allowed only 1.68 million Japanese cars into the U.S. each year. The cap was raised to 1.85 million cars in 1984, and to 2.30 million in 1985, before the program was terminated in 1994 

External links[edit]

Further reading[edit]

  • Automotive News Europe (2001), "Why the Japanese can't get going in Europe", Automotive News Europe, available at: www.autonewseurope.com/ stories0604/japanese604.htm, No.4 June, .
  • Boonekamp, C.F.J. (1987), "Voluntary export restraints", Finance & Development, Vol. 24 No.4, pp. 2–5.
  • Caves, R.E. (1982), Multinational Enterprise and Economic Analysis, Cambridge University Press, Cambridge, .
  • European Commission (1991), Press Statement European Commission: Statement by Mr Andriessen, Vice-President of the Commission of the European Communities concerning the results of conversations between the Commission and Japan on motor vehicles. Brussels, 31 July, .
  • Feast, R. (2002), "Local production didn't help the Japanese", Automotive News Europe, Vol. 7 No.17, pp. 26–7.
  • Hindley, B. (1986), "EC imports of VCRs from Japan – a costly precedent", Journal of World Trade, Vol. 20 No.2, pp. 168–84.
  • Hizon, E.M. (1994), "The safeguard/VER dilemma: the Jekyll and Hyde of trade protection", Northwestern Journal of International Law & Business, Vol. 15 No.1, pp. 105–38.
  • Holloway, N. (1992), "If you can't beat'em: Europe tries softer approach to Asian business", Far Eastern Economic Review, Vol. 155 No.40, pp. 70–2.
  • (1995), in Hünerberg, H., Heise, K., Hoffmeister, H. (Eds),Internationales Automobilmarketing: Wettbewerbsvorteile durch marktorientierte Unternehmensführung, Gabler, Wiesbaden, .
  • Kostecki, M.M. (1991), "Marketing strategies and voluntary export restraints", Journal of World Trade, Vol. 25 No.4, pp. 87–100.
  • Magee, S.P., Brock, W.A., Young, L. (1989), Black Hole Tariffs and Endogenous Policy Theory. Political Economy in General Equilibrium, Cambridge University Press, New York, NY, .
  • Preusse, H.G. (1992), "Freiwillige Selbstbeschränkungsabkommen und internationale Wettbewerbsfähigkeit der europäischen Automobilindustrie: Zu den potentiellen Auswirkungen der Vereinbarung der Europäischen Gemeinschaft mit Japan", Aussenwirtschaft, Vol. 47 No.III, pp. 361–88.
  • Schuknecht, L. (1992), Trade Protection in the European Community, Harwood Academic Publishers, Chur, .
  • Scott, R.E. (1994), "The effects of protection on a domestic oligopoly: the case of the US auto market", Journal of Policy Modeling, Vol. 16 No.3, pp. 299–325.
  • Seebald, C.P. (1992), "Life after the voluntary restraint agreements: the future of the US steel industry", George Washington Journal of International Law and Economics, Vol. 25 No.1, pp. 875–905.
  • Wells, L.T. (1998), "Multinationals and the developing countries", Journal of International Business Studies, Vol. 29 No.1, pp. 101–14.
  • Berry, S., Levinsohn, J., Pakes, A. (1999), "Voluntary export restraints on automobiles: evaluating a trade policy", The American Economic Review, Vol. 89 No.3, pp. 400–30.
  • Crandall, R.W. (1987), "The effects of US trade protection for autos and steel", Brookings Papers on Economic Activity, Vol. 1 No.1, pp. 271–88.
  • Denzau, A.T. (1988), "The Japanese automobile cartel: made in the USA", Regulation, Vol. 12 No.1, pp. 11–16.
  • Kent, J. (1989), "Voluntary export restraint: political economy, history and the role of the GATT", Journal of World Trade, Vol. 23 No.39, pp. 125–40.
  • Kumlicka, B.B. (1987), "Steel goes to Washington: lessons in lobbying", Ivey Business Quarterly, Vol. 52 No.2, pp. 52–3.
  • Naumann, E., Lincoln, D. (1991), "Non-tariff barriers and entry strategy alternatives: strategic marketing implications", Journal of Small Business Management, Vol. 29 No.2, pp. 60–70.
  • Preusse, H.G. (1991), "Voluntary export restraints – an effective means against a spread of neo-protectionism?", Journal of World Trade, Vol. 25 No.2, pp. 5–17.
  • Wolf, M. (1989), "Why voluntary export restraints? An historical analysis", The World Economy, Vol. 12 No.3, pp. 273–91.
  • Yeh, Y.H. (1999), "Tariffs, import quotas, voluntary export restraints and immiserizing growth", American Economist, Vol. 43 No.1, pp. 88–92.