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

Author

Listed:
  • 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.

Suggested Citation

  • Smith, Alasdair & Venables, Anthony J, 1988. "Counting the Cost of Voluntary Export Restrictions in the European Car Market," CEPR Discussion Papers 249, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:249
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    Citations

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    Cited by:

    1. 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).
    2. Pinelopi Koujianou Goldberg & Frank Verboven, 2001. "The Evolution of Price Dispersion in the European Car Market," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 811-848.
    3. J. David Richardson, 1989. "Empirical Research on Trade Liberalization With Imperfect Competition: A Survey," NBER Working Papers 2883, National Bureau of Economic Research, Inc.

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