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


  • Smith, Alasdair
  • Venables, Anthony J


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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    References listed on IDEAS

    1. Buiter, Willem H, 1988. "Structural and Stabilization Aspects of Fiscal and Financial Policy in the Dependent Economy," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 220-245, June.
    2. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
    3. Willem H. Buiter, 1986. "Fiscal Prerequisites for a Viable Managed Exchange Rate Regime: A Non-technical Eclectic Introduction," NBER Working Papers 2041, National Bureau of Economic Research, Inc.
    4. Buiter, Willem H., 1987. "Borrowing to defend the exchange rate and the timing and magnitude of speculative attacks," Journal of International Economics, Elsevier, vol. 23(3-4), pages 221-239, November.
    5. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
    6. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-293, June.
    7. Blinder, Alan S, 1987. "Credit Rationing and Effective Supply Failures," Economic Journal, Royal Economic Society, vol. 97(386), pages 327-352, June.
    8. Feltenstein, Andrew & Morris, Stephen, 1988. "Fiscal stabilization and exchange rate instability," Policy Research Working Paper Series 74, The World Bank.
    9. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
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    11. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    12. Buiter, Willem H., 1977. "`Crowding out' and the effectiveness of fiscal policy," Journal of Public Economics, Elsevier, vol. 7(3), pages 309-328, June.
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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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