What Is A Voluntary Restraint Agreement

When the auto industry in the United States was threatened by the popularity of cheaper, more fuel-efficient Japanese cars, a 1981 restraint agreement limited the Japanese to export 1.68 million cars to the United States each year, as determined by the U.S. government. [2] This quota was originally due to expire after three years, in April 1984. However, in the face of a growing trade deficit with Japan and pressure from domestic manufacturers, the U.S. government extended the quotas for another year. [3] The ceiling was raised to 1.85 million cars for the following year and then to 2.3 million for 1985. The withholding was lifted in 1994. [4] Voluntary export restrictions (VERs) fall into the broad category of non-tariff barriers, which are trade-restrictive barriers such as quotas, sanctions, embargoes and other restrictions. As a general rule, REVs are the result of requests from the importing country to grant a certain level of protection to its domestic companies producing competing products, although these agreements can also be concluded at the industry level.

Studies on the effectiveness of VER suggest that they are not effective in the long term. One example is Japan`s voluntary restriction on exporting Japanese cars to the United States. The U.S. government wanted to protect its automakers because domestic industry was threatened by cheaper, more fuel-efficient Japanese automobiles. A voluntary export restriction (VER) is a self-imposed trade restriction in which the government of one country limits the quantity of a particular product or category of goods that can be exported to another country. The restriction could be a reduction in the quantity exported or a complete restriction. U.S.-based textile producers faced increasing competition from Southeast Asian countries in the 1950s and 1960s. The U.S. government has called for the implementation of REVs by many Southeast Asian countries and has succeeded in doing so. Textile producers in Europe faced as fierce competition as their American counterparts and therefore also negotiated voluntary export restrictions.

Typically, a country imposes a voluntary export restriction at the request of an importing country seeking to protect its domestic producers. The exporting country establishes an ERR to avoid trade restrictions imposed on the importing country. By applying a voluntary export restriction, the exporting country can exercise some degree of control over the restriction that would otherwise be lost if it were subject to trade restrictions by the importing country. Therefore, despite what its name suggests, VER are rarely voluntary. Voluntary export restrictions have been used in the past for a variety of marketed products and have been applied since the 1930s. . .