Voluntary export restraint (VER) is a trade restriction, at the request of the concerned importing nation, on the maximum quantity of goods that an exporting country can sell to the export destination during a particular time period.
VER provides domestic industries of the importing country some degree of protection from the onslaught of foreign competition.
Exporting countries also prefer negotiated agreements under VER than suffering worse terms through unilateral import barriers like import quotas or tariff walls. Exporters thus tolerate VER because in spite of making fewer export sales than in free trade, the price and profit per unit of sale is more. VER arrangement is thus seldom “voluntary” in the true sense of the term but rather a compromise on the considerations of loss minimization. .
Other than the consumer, all market participants gain from VER arrangement.
In the importing country, VERs encourage sourcing of products from vendors other than the most efficient supplier.
VER has been in vogue since the 1930s for products ranging from footwears and textiles to automobiles, steel and machine tools. In 1994, after the Uruguay round of GATT, WTO members agreed not to invoke any new VER and to phase out the existing VERs within a time line of four years. However, in each importing country there can be exception in favor of one sector for continuance of VER.
The most significant example of export restriction can be cited from the Japanese automobile industry, when in the 1980s under pressure from America, Japan enforced voluntary export restraint on its auto exports into the US. It provided US manufacturers with much needed sigh of relief.
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