Voluntary Export Restraint (VER)
Additional Information
A Voluntary Export Restraint (VER) is a trade policy measure implemented by a country, typically at the request of an importing country, to limit its exports of a particular product. It is a self-imposed restriction on the quantity or value of goods that a country is willing to export to another country. VERs are considered a form of non-tariff barrier to trade and are used as an alternative to imposing tariffs or quotas.
When an importing country believes that its domestic industries are being harmed by an influx of imports, it may request the exporting country to voluntarily restrict its exports by implementing a VER. The exporting country then agrees to limit its exports by a specified amount or value. VERs are often negotiated between governments and are, as the name suggests, voluntarily agreed upon.
VERs have been used in various industries, such as automobiles, textiles, steel, and electronics, and have been prevalent in global trade since the 1970s. For example, in the 1980s, the United States imposed VERs on Japanese automobile exports to limit competition to domestic automakers. Similarly, the European Union utilized VERs on textile imports from China and other countries to protect its domestic textile industry.
The purpose of a VER is to provide temporary relief to domestic industries facing intense competition from imports. It allows the importing country's industry to adjust to foreign competition, helps maintain employment levels, and protects domestic producers from severe market disruptions. VERs are often seen as a compromise measure between protectionist policies and more open trade.
However, VERs have several drawbacks and controversies associated with them. One of the criticisms is that VERs can distort international trade flows and may not lead to long-term global economic efficiency. By restricting imports, VERs reduce consumer choice and can lead to higher prices for domestic consumers. Additionally, VERs can create tensions and conflicts between trading partners if perceived as unfair or discriminatory. There have been instances where VERs have triggered retaliatory measures, leading to trade wars.
An interesting nuance regarding VERs is the term "voluntary." While they are technically voluntary in the sense that the exporting country agrees to implement them, the reality is that they are often the result of diplomatic pressure or threats of more severe trade actions. In some cases, the importing country may even use the threat of imposing tariffs or quotas if the exporting country does not agree to a VER.
A Voluntary Export Restraint (VER) is a trade policy measure in which an exporting country voluntarily agrees to limit the quantity or value of its exports to an importing country. VERs are temporary measures aimed at protecting domestic industries from intense foreign competition. While they have been used in various industries, they can distort trade flows and have the potential to spark trade conflicts. The "voluntary" nature of VERs can be questionable, as they are often the result of negotiations and diplomatic pressure.