Voluntary Export Restraints: A Suitable Case for Political Economy Investigation

Increasingly throughout the 1970's and 80's protectionist external-trade policies have proliferated in both the advanced and developing worlds. This new protectionism has been attributed to a variety of causes: the world recession, intensified by the two oil crises of 1973 and 1979; to the emergence of new economic powers, mainly Japan and other Asian countries; to technological change; and to the introduction of a floating exchange rate regime. More accurately it should be described as renewed protectionism. During the period 1950 to 1970 the most obvious symptoms of protectionism subsided, but by no means disappeared, and the last decade or so has seen a reversal of this trend. Nonetheless, the tariff reductions painfully negotiated under the aegis of the Kennedy and Tokyo Rounds have been retained, so resort to non-tariff barriers has been greater. In particular new devices have been introduced and foremost amongst them have been voluntary exportrestraint agreements (VER's). In this review I intend to look at the nature of the VER arrangements, the economic effects that appear to accompany their introduction and outline the political economy elements that explain their proliferation.