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.

Typically VERs arise when the import-competing industries seek protection

Protectionism

Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...

 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.

Also, VERs are typically implemented on a bilateral

Bilateralism

Bilateralism consists of the political, economic, or cultural relations between two sovereign states. For example, free trade agreements signed by two states are examples of bilateral treaties. It is in contrast to unilateralism or multilateralism, which refers to the conduct of diplomacy by a...

 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 textile

Textile

A textile or cloth is a flexible woven material consisting of a network of natural or artificial fibres often referred to as thread or yarn. Yarn is produced by spinning raw fibres of wool, flax, cotton, or other material to produce long strands...

s and footwear

Footwear

Footwear consists of garments worn on the feet, for fashion, protection against the environment, and adornment. Being barefoot is commonly associated with poverty, but some cultures chose not to wear footwear at least in some situations....

 to steel

Steel

Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...

, 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 General Agreement on Tariffs and Trade

General Agreement on Tariffs and Trade

The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...

 (GATT), completed in 1994, World Trade Organization

World Trade Organization

The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...

 (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 examples of VERs occurred with auto exports from Japan

Japan

Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...

 in the early 1980s and with textile exports in the 1950s and 1960s.

1981 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.

The Japanese automobile industry responded by establishing assembly plants or "transplants" in the United States to produce mass market vehicles. They also began exporting bigger, more expensive cars (soon under their newly-formed luxury brands like Acura

Acura

Acura is the luxury vehicle division of Japanese automaker Honda Motor Company. The brand has been available in the United States and Canada since March 1986, marketing luxury, performance, and near-performance vehicles. It was introduced to Hong Kong in 1991, Mexico in 2004, and China in 2006...

, Lexus

Lexus

is the luxury vehicle division of Japanese automaker Toyota Motor Corporation. First introduced in 1989 in the United States, Lexus is now sold globally and has become Japan's largest-selling make of premium cars. The Lexus marque is marketed in over 70 countries and territories worldwide, and has...

, and Infiniti

Infiniti

is the luxury division of automaker Nissan. Infiniti officially started selling vehicles on November 8, 1989 in North America. Marketing operations have since grown to include the Middle East, South Korea, Russia, Taiwan, China, Ukraine and the United Kingdom. Infiniti began sales in additional...

).

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, .
• 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.