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Do exporters gain from VERs?

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  • de Melo, Jaime
  • Winters, L. Alan

Abstract

Previous literature has concentrated on the rent transfer accruing to exporting countries when a voluntary export restraint (VER) is binding. This paper studies the efficiency and distributional effects arising when VERs force factors out of industries in which they are most productive. A theoretical model of the industry under the VER is developed to establish qualitative conditions under which a VER will result in: Spillovers of exports to unrestricted markets; industry contraction; and loss in national welfare. Key parameters of demand and supply are estimated for leather footwear exports from Taiwan subject to the U.S. Orderly Marketing Agreement, and their implications explored in a calibrated simulation exercise. The results make a strong indictment of VERs. For most plausible parameter values, VERs distort exports, reduce industry size and cause overall economic losses, especially if the affected industry is large.
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Suggested Citation

  • de Melo, Jaime & Winters, L. Alan, 1993. "Do exporters gain from VERs?," European Economic Review, Elsevier, vol. 37(7), pages 1331-1349, October.
    • Handle: RePEc:eee:eecrev:v:37:y:1993:i:7:p:1331-1349
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    Cited by:

    1. Baylis, Katherine R., 2003. "Dispatches From The Tomato Wars: The Spillover Effects Of Trade Barriers," 2003 Annual meeting, July 27-30, Montreal, Canada 22120, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Elena Ianchovichina & Maros Ivanic, 2016. "Economic Effects of the Syrian War and the Spread of the Islamic State on the Levant," The World Economy, Wiley Blackwell, vol. 39(10), pages 1584-1627, October.
    3. Roberto A. De Santis, 2003. "Why exporting countries agree to voluntary export restraints: the oligopolistic power of the foreign supplier," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(3), pages 247-263, August.
    4. Taran Fæhn, 2002. "The Qualitative and Quantitative Significance of Non-Tariff Barriers: An ERP study of Norway," Economic Systems Research, Taylor & Francis Journals, vol. 14(1), pages 35-57.
    5. Vennemo, Haakon & Aunan, Kristin & He, Jianwu & Hu, Tao & Li, Shantong & Rypd3al, Kristin, 2008. "Environmental impacts of China's WTO-accession," Ecological Economics, Elsevier, vol. 64(4), pages 893-911, February.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F10 - International Economics - - Trade - - - General
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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