Voluntary export restraint

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A voluntary export restraint (VER) or voluntary export restriction is a government-imposed limit on the quantity of some category of goods that can be exported to a specified country during a specified period of time. They are sometimes referred to as 'Export Visas'.^[1]

Typically VERs arise when industries seek protection from competing imports from particular countries. VERs are then offered by the exporting country to appease the importing country and deter it from imposing explicit (and less flexible) trade barriers.

Basic Introduction[]

Voluntary export restrictions are usually due to pressure from importing countries. Therefore, one can consider export restrictions to be "voluntary" simply because exporting countries may find such restrictions more desirable than alternative trade barriers that importing countries may establish. In addition, in non-competitive, especially oligopolistic industries, export companies may find that negotiating voluntary export restrictions is beneficial to them, and then export restrictions are truly "voluntary."^[2]

If voluntary export restrictions include government-to-government agreements, they usually refer to orderly market sales arrangements, and usually specify export management rules, negotiation rights, and supervision of trade flows. In some countries, especially in the United States, structured marketing arrangements are legally different from strictly defined voluntary export restrictions. Agreements involving industry participation are often referred to as voluntary restriction arrangements. The difference between these forms of voluntary export restrictions is mainly legal and literal, and has nothing to do with the economic impact of voluntary export restrictions.^{[citation needed]}

A typical voluntary export restriction imposes restrictions on the supply of export products based on the type, country and quantity of the commodity. The -General Agreement on Tariffs and Trade regulations on government's influence on trade prohibit export restrictions under normal circumstances; if export restrictions are approved, these restrictions must be non-discriminatory and can only be implemented through tariffs, taxes and fees. However, the government's involvement in voluntary export restrictions is not always clear. In addition, voluntary export restrictions do not always have clear market share clauses; for example, they may take the form of export forecasts and therefore become cautious in nature.^{[citation needed]}

Characteristics[]

VERs are typically implemented on exports from one specific country to another. 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^{[citation needed]}; they did not violate countries' agreements under the General Agreement on Tariffs and Trade (GATT) in force. As a result of the Uruguay round of the GATT, completed in 1994, World Trade Organization (WTO) members agreed not to implement any new VERs, and to phase out any existing ones over a four-year period, with exceptions grantable for one sector in each importing country.

Some examples of VERs occurred with automobile exports from Japan in the early 1980s and with textile exports in the 1950s and 1960s.

Manifestation[]

1. Unilateral automatic export restrictions

Unilateral automatic export restriction means that the exporting country unilaterally sets export quotas on its own to restrict the export of commodities. Some of these quotas are stipulated and announced by the government of the exporting country. Exporters must apply for quotas from relevant agencies and obtain an export license before exporting. Some are stipulated by exporters or trade associations of the exporting country according to the government's policy intentions.

2. Agreement automatic export restrictions

The automatic export restriction of the agreement means that the importing country and the exporting country gradually expand the self-restriction agreement or orderly marketing arrangements to provide for certain products to be exported during the validity period of the agreement. The exporting country has accordingly adopted an export licensing system. Restrict the export of relevant commodities, and the importing country shall conduct supervision and inspection based on customs statistics.As one of the non-tariff measures, automatic export restrictions have seriously hindered the development of international trade. In September 1986, the Uruguay Round of negotiations began to include automatic export restrictions as one of the important elements of the negotiations to reduce and abolish non-tariff barriers. As a result of the negotiations, Article 19 of the General Agreement was amended to restrict the application of automatic export restrictions.

1980 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.^[3] This quota was originally intended to expire after three years, in April 1984. However, with a growing deficit in trade with Japan, and under pressure from domestic manufacturers, the US government extended the quotas for an additional year.^[4] The cap was raised to 1.85 million cars for this additional year, then to 2.3 million for 1985. The voluntary restraint was removed in 1994.^[5]

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 - the luxury marques distanced themselves from its parent brand which was mass marketed) in order to make more money from a limited number of cars.

See also[]

• Voluntary compliance

References[]

External links[]

• Glossary of International Trade Terms
• Export Glossary-UV
• Trade: Chapter 10-3: Voluntary Export Restraints (VERs) (Steven M. Suranovic)

Further reading[]

• 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, .
• 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.
• 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, .
• 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.
• 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, .
• 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.
• Kostecki, M.M. (1991), "Marketing strategies and voluntary export restraints", Journal of World Trade, Vol. 25 No.4, pp. 87–100.
• Kumlicka, B.B. (1987), "Steel goes to Washington: lessons in lobbying", Ivey Business Quarterly, Vol. 52 No.2, pp. 52–3.
• 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, .
• 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.
• — (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.
• 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.