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Counting the Cost of Voluntary Export Restrictions in the European Car Market

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  • Smith, Alasdair
  • Venables, Anthony J.

Abstract

The effects of `voluntary' export restrictions (VERs) on sales of Japanese cars to some European markets are studied in this paper, using a numerically calibrated model of quantitative trade restrictions in a market with imperfect competition and economies of scale. In this framework, the VER has an anti-competitive effect. On the basis of 1985 data we estimate the costs to the UK of the restriction to be between 95m and 130m pounds sterling per year. Since the welfare cost of a tariff which would have the same effect on UK production would be less than half of the cost of the voluntary export restraint, it follows that the VER is a very inefficient policy instrument. The Italian and French markets have tighter VERs than the UK, with correspondingly higher costs; but replacement of individual European VERs with Community-wide restrictions on imports from Japan would impose costs on member countries that currently do not have such restrictions.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 249.

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Date of creation: Jun 1988
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Handle: RePEc:cpr:ceprdp:249

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Related research

Keywords: EC; Imperfect Competition; Motor Industry; Trade Restrictions; Voluntary Export Restraints;

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Cited by:
  1. Pinelopi Koujianou Goldberg & Frank Verboven, 1998. "The Evolution of Price Dispersion in the European Car Market," NBER Working Papers 6818, National Bureau of Economic Research, Inc.
  2. Bletschacher, Georg & Klodt, Henning, 1992. "Strategische Handels- und Industriepolitik : theoretische Grundlagen, Branchenanalysen und wettbewerbspolitische Implikationen," Open Access Publications from Kiel Institute for the World Economy 456, Kiel Institute for the World Economy (IfW).
  3. J. David Richardson, 1990. "Empirical Research on Trade Liberalization With Imperfect Competition: A Survey," NBER Working Papers 2883, National Bureau of Economic Research, Inc.

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