What Are Export Restraint Agreements

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The maintenance of workstations by VERs can be very expensive. Estimates for 1984 indicate that the annual cost to U.S. consumers under VERs for textiles and clothing was US$50,000 or US$39,000 per item, compared to the average annual wages of textiles and clothing of US$13,400 and US$10,500. The OECD has calculated that each job protected under the orderly marketing agreement on Japan`s colour television exports to the United States costs about $60,000 per year. When negotiating an VER, the importing country tends to avoid the often lengthy, public and often multilateral debate that precedes other forms of protectionism, such as increasing tariffs or introducing quotas. In such a debate, the cost of the protection measure should be better recognized, making the measure politically costly and risky. A VER then has the advantage of avoiding, as a measure of a foreign source, a national struggle; it can often be negotiated quickly without its costs becoming obvious. In addition, with respect to subsidized or suspected exports, national authorities can circumvent the often costly and time-consuming process of an anti-tax investigation by reaching an agreement with the exporter. Finally, it can be argued that an VER, by addressing the cause of the problem, that is, one or the other low-cost supplier that disrupts domestic industry, extends the need for more comprehensive measures that could harm third countries, as would be the case for a non-discriminatory import quota of the same import reduction (see below). For all these reasons, local policy makers often prefer alternative measures to the VER; it provides relatively rapid and politically low-cost assistance to an industry threatened by import competition. In addition to textiles and clothing, steel is the product category most affected by VERs. Since the first trade restriction in this sector in 1968 between the United States and several European and Japanese exporters, about a quarter of total steel trade has fallen under the VER, with respect to exports from almost all major third-country suppliers to the United States and the European Community, as well as Eusday exports to the United States.

Exports of agricultural products are also limited by VERs, mainly by more efficient producers such as Australia and Argentina, to the European Community. With regard to motor vehicles and means of transport, as well as electronic products and machine tools, Japanese exporters limit their sales to both the European Community and the United States, while for footwear, a number of OECD markets are protected by VERs with Korean exporters. As a general rule, at the request of an importing country seeking protection for its domestic producers, a country imposes a voluntary export restriction. The exporting country sets up a VER to avoid any trade restrictions of the importing country. The answer to this question depends on whether a worm serves its purpose of preserving employment and promoting adaptation in the protected sector and, if so, at what cost. These objectives may be incompatible.