VERs

Definition

VERs, or Voluntary Export Restraints, are a type of non-tariff barrier to trade where a country agrees to limit the quantity of exports it sells to another country, typically at the request of the importing country. This is done voluntarily, without the use of formal trade policies or regulations.

5 Must Know Facts For Your Next Test

1. VERs are often used to protect domestic industries from foreign competition, particularly in industries facing import surges or unfair trade practices.
2. The exporting country agrees to the VER voluntarily, typically to avoid the imposition of more restrictive trade barriers by the importing country.
3. VERs are considered a type of non-tariff barrier because they do not involve the use of tariffs or duties, but rather a voluntary limitation on exports.
4. VERs are often used as a temporary measure to provide domestic industries with time to adjust to increased foreign competition.
5. The effectiveness of VERs has been debated, as they can lead to higher prices for consumers and may not always achieve the desired outcome of protecting domestic industries.

Review Questions

• Explain how VERs are a form of non-tariff barrier to trade.
  • VERs, or Voluntary Export Restraints, are a type of non-tariff barrier to trade because they restrict or distort international trade without the use of tariffs or duties. Instead, the exporting country agrees to voluntarily limit the quantity of exports it sells to another country, typically at the request of the importing country. This voluntary limitation on exports acts as a barrier to trade, similar to other non-tariff barriers such as quotas, subsidies, or regulations.
• Describe the rationale behind the use of VERs by governments.
  • Governments often use VERs as a protectionist measure to shield domestic industries from foreign competition, particularly in industries facing import surges or unfair trade practices. The exporting country agrees to the VER voluntarily, typically to avoid the imposition of more restrictive trade barriers by the importing country. VERs are seen as a temporary measure to provide domestic industries with time to adjust to increased foreign competition, although their effectiveness has been debated.
• Evaluate the potential impact of VERs on consumers and domestic industries.
  • The use of VERs can have both positive and negative impacts on consumers and domestic industries. On the one hand, VERs may protect domestic industries from foreign competition, potentially preserving jobs and supporting the local economy. However, the voluntary limitation on exports can lead to higher prices for consumers, as the restricted supply of imported goods may drive up prices. Additionally, VERs may not always achieve the desired outcome of protecting domestic industries, as they can distort market forces and lead to inefficiencies in the long run. Policymakers must carefully weigh the potential benefits and drawbacks of using VERs as a trade policy tool.

Related terms

Non-Tariff Barriers: Government policies or regulations, other than tariffs, that restrict or distort international trade, such as quotas, subsidies, or regulations.

Quota:

A limit on the quantity or value of a good that can be imported or exported during a specific time period.

Protectionism:

Economic policies that restrict or regulate trade between nations to protect domestic industries from foreign competition.