Voluntary export restraint agreements (VERs) are a trade mechanism that is used by countries to restrict the amount of exports being sent to another country. This agreement is called voluntary because it is agreed upon by the exporting country, with no coercion from the importing country or any other external entity.
VERs have been used in international trade for decades, primarily in industries such as automobiles, steel, and textiles. The most prominent example of a VER was the 1981 agreement between the United States and Japan, which placed limits on the number of Japanese cars being imported into the U.S. market. The agreement was designed to protect the U.S. auto industry from being overrun by Japanese imports, while also alleviating political pressure on the U.S. government to impose strict trade restrictions on Japan.
The goal of a VER is to create a level playing field for both the importing and exporting countries, and to prevent a surge of cheap imports from flooding domestic markets. It is often used by developed countries to protect their domestic industries from foreign competition, especially in cases where there is a significant trade imbalance between the two countries.
VERs have advantages and disadvantages for both the exporting and importing countries. From the perspective of the exporting country, the VER provides a level of predictability and stability in their exports to the importing country, which can help to maintain good relationships and prevent any unforeseen disruptions to the trade relationship. From the perspective of the importing country, the VER can limit the amount of imports coming into their market, helping to protect domestic industries and preserve jobs.
However, VERs can also have negative consequences. They can create a false sense of security in the importing country, leading to a lack of innovation and competitiveness among domestic industries. They can also create shortages of goods in the importing country, leading to higher prices for consumers.
In conclusion, voluntary export restraint agreements are a trade mechanism that is used by countries to limit the amount of exports being sent to another country. While they can provide certain benefits for both the exporting and importing countries, they can also have negative consequences that must be carefully considered before implementing such an agreement.