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Trade Policy Instruments In The Modern World

3052 words - 13 pages

Trade Policy Instruments in the Modern World
Voluntary Export Restraint
Anela Šemić

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Trade Policy Instruments in the Modern World Contents
1 2 Introduction ............................................................................................................................. 2 Theory of Voluntary Export Restraint...................................................................................... 3 2.1 2.2 2.3 3 4 5 6 Why importers ask for imposing voluntary export restraint ........................................... 4 Why exporters accept to impose VER .............................................................................. 4 Who is the biggest loser from imposing ...view middle of the document...

In this essay, we take a closer look at the unique role of voluntary export restraint among other non tariff barriers. Voluntary export restraint is special kind of non tariff barriers because of the fact that this restriction is imposed by exporter’s side at the request of importer. We begin by going over the definition of voluntary export restraint, from the narrow to the broader view. Then, we look at how this restriction works in the practice. As you will see, we explain theoretical part through the case of automobile industry which examines the conflict between the United States and Japan in automobile industry during 1970s and 1980s. The second case is the case of footwear which examines the conflict between the USA and newly industrialized countries of Asia. Mentioned cases will provide an answer to the question why importers require this kind of restriction knowing the fact that voluntary export restraint reduces their social welfare directly.

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Trade Policy Instruments inTheory of Voluntary Export Restraint 2 the Modern World

Figure 1

From the Figure 1 we can see that voluntary export restraint belongs to the group of non tariff barriers which directly reduces social welfare. Voluntary export restraint is quantity restriction like quotas, the difference is in the fact that restriction is negotiated with, and imposed upon, exporting countries, instead of importing. It is important to mention that they are generally imposed at the request of the importer and are agreed to by the exporter to avoid other trade restrictions.

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Trade providing answers to three questions: World Policy Instruments in the Modern
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In order of better explanation of the topic, we decided to explain theoretical part through

Why importers ask for imposing voluntary export restraint? Why exporters accept to impose VER? Who is the biggest loser from imposing VER?

2.1 Why importers ask for imposing voluntary export restraint
Large and powerful countries use this kind of restriction in order to protect their industries and the inefficiency of their domestic producers making them more competitive and helping them to exceed strong waves of imports. They use voluntary export restraint instead of any other barrier because they want to avoid violation of GATT (General Agreement on Tariffs and Trade), and in the same time to keep the title of the state which promotes free trade and which is a leader in the free trade.

2.2 Why exporters accept to impose VER

Whenever you see this shortcut, you should know that probably certain political and legal advantages are included in setting this kind of barrier. But from an economic point of view, however, they agreed to impose this kind of restriction to forestall other trade restrictions. In a voluntary export restraint licenses are given to foreign governments and it is very costly to the importing country, which implies that it clearly produces a loss for the importing country.

2.3 Who is the...

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