ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A voluntary export restraint (VER) is a self-imposed limit on the quantity of a good that an exporting country is allowed to export. VERs are considered non-tariff barriers, which are restrictive trade barriers-such as quotas and embargoes.

Detailed explanation-2: -Motivations Behind Voluntary Export Restraints Typically, a country imposes a voluntary export restraint at the request of an importing country that seeks protection for its domestic producers. The exporting country establishes a VER to avoid facing trade restrictions from the importing country.

Detailed explanation-3: -Voluntary Export Restraints Examples Political pressure built up in the US to protect the domestic automobile industry. Instead of going for unilateral measures such as a tariff or quota on Japanese cars, the US put pressure on Japan to “voluntarily” reduce car exports to the US.

Detailed explanation-4: -A VER raises consumer surplus in the export market and lowers it in the import country market. A VER lowers producer surplus in the export market and raises it in the import country market. National welfare may rise or fall when a large exporting country implements a VER.

Detailed explanation-5: -A quota is imposed by the country to which an import is flowing. The importing country decides how much of this import is allowed in the country. The exporting country has no say in the matter. A voluntary export restrain is imposed by the country which is sending the export.