Voluntary export restraint

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.

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; 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.

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.[2] 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.[3] 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.[4]

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.

References

  1. ↑ JOHNSON, Thomas E.; BADE, Donna L. (2010-04-15). Export/Import Procedures and Documentation. AMACOM Div American Mgmt Assn. ISBN 9780814415511.
  2. ↑ Itō, Takatoshi. 1992. The Japanese Economy. MIT Press. 370
  3. ↑ Schuon, Marshall (1984-11-25). "About Cars; Chevrolet's Trio Challenge Imports". The New York Times.
  4. ↑ 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

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, .
  • 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.
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