Voluntary Export Restraint Agreements Definition

There are ways to avoid a VER by a company. For example, the exporting country`s company can still build a production site in the country where exports are directed. In this way the company is no longer obliged to export goods and should not be linked to the country`s VER. In addition to textiles and clothing, steel is the product category most affected by VERs. Since the first trade restriction in this sector in 1968 between the United States and several European and Japanese exporters, about a quarter of total steel trade has fallen under the VER, with respect to exports from almost all major third-country suppliers to the United States and the European Community, as well as Eusday exports to the United States. Exports of agricultural products are also limited by VERs, mainly by more efficient producers such as Australia and Argentina, to the European Community. With regard to motor vehicles and means of transport, as well as electronic products and machine tools, Japanese exporters limit their sales to both the European Community and the United States, while for footwear, a number of OECD markets are protected by VERs with Korean exporters. As has already been noted, VER can and has spread from country to country and from product to product. In this regard, their demonstration effect can be significant. In addition, as noted above, a VER tends to reduce the world price of the product, which increases demand in third countries that could be satisfied by imports of the product. This effect could be reinforced by the fact that exporters covered by the VER are able to use their rents in the protected market to gain market share in unprotected countries.

These factors can help convince third countries, especially those who manufacture the product concerned, to also negotiate VERs. Finally, a VER network, as in the case of textiles, clothing and steel, could indeed lead to an overall distribution of the market. VERs are generally created when industries seek refuge from competing imports from certain countries. The exporting country then proposes veRs to appease the importing country and prevent it from imposing explicit (and less flexible) trade barriers. More generally, VERs can provide resources for adjustment by increasing domestic profits. This appears to have happened in the U.S. automotive industry and in parts of the textile and steel industry, both in the European industry. The Community and the United States. However, in these sectors, the protection of the VER has also enabled exporters to improve the quality of their products. As a result, domestic industry faces increased competition, particularly in areas where they would have had a comparative advantage. The application of a voluntary export restriction allows the exporting country to exercise some degree of control over the restriction that would otherwise be lost if it were subject to trade restrictions from the importing country.

Therefore, despite what its name indicates, VERs are rarely voluntary. In addition to the fact that it is imposed by the exporting country and not by the importing country, a VER essentially acts as an import quota or a tariff on import tariffs is a form of tax levied on imported goods or services. Tariffs are a common element of international trade. The main objectives of taxation. Price increases due to VERs can be significant. A recent study on the impact of VER on automobile exports from Japan to the United States (“The Cost of Trade Restraints” by Charles Collyns and Steven Dunaway, IMF Staff Papers, March 1987) estimated that the average price of a car sold in the United States in 1984 was about $1650 or 17 percent higher than it would have been without the VER.

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