Voluntary Export Restraint (Ver)

Published Oct 26, 2023

Definition of Voluntary Export Restraint (VER)

A Voluntary Export Restraint (VER) refers to a trade policy implemented by a country to limit the quantity of goods it exports to another country. Unlike other forms of trade barriers, a VER is voluntary and agreed upon by the exporting country, often due to pressure or negotiation with the importing country. The aim of a VER is to protect domestic industries and address trade imbalances by limiting the influx of foreign goods.

Example

To understand how a Voluntary Export Restraint works, let’s consider an example involving two countries: Country A and Country B. Suppose Country A is a major exporter of automobiles, and Country B is concerned about the impact of imported automobiles on its domestic industry. In order to address this concern, the two countries negotiate and reach an agreement on a Voluntary Export Restraint.

Under this agreement, Country A voluntarily agrees to limit the number of automobiles it exports to Country B to a specific quantity. This quota is typically lower than the actual demand in Country B. By implementing a VER, Country B can protect its domestic automobile industry from a surge in imports that could potentially harm local manufacturers and workers.

Why Voluntary Export Restraints Matter

Voluntary Export Restraints have been employed by various countries as a means to address trade imbalances, protect domestic industries, and maintain a stable economy. While a VER may provide temporary relief for the recipient country’s industries, it can also lead to unintended consequences. These can include higher prices for consumers, reduced availability of goods, and potential negative impacts on global trade relations.

Understanding the implications of Voluntary Export Restraints is crucial for policymakers and trade negotiators. It allows them to assess the potential benefits and drawbacks of such agreements and make informed decisions that promote both domestic industries and the overall welfare of their country’s economy.