Voluntary_Export_Restraints

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 a country during a specified period of time. Usually the importing country coerces the exporter into a "voluntary" restraint agreement, and the word voluntary is in quotes to indicate it's not truly voluntary.

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. VERs are rarely completely voluntary. They represent a Beggar thy neighbour policy that seeks to shift economic activity (or preserve it) for the importing country, and has the effect of increasing costs for consumers there.

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 GATT, completed in 1994, 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 interesting examples of VERs occurred with auto exports from Japan in the early 1980s and with textile exports in the 1950s and 60s.

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. The Japanese automobile industry responded by exporting bigger more expensive cars and building assembly plants in the U.S.

External links

Glossary of International Trade Terms
Export Glossary-UV
Trade: Chapter 10-3: Voluntary Export Restraints (VERs) (Steven M. Suranovic)
Benjamin, Daniel K. (September 1999). "Voluntary Export Restraints on Automobiles". PERC Reports: Volume 17, No. 3. Property & Environment Research Center. Retrieved on 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"

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Further reading