Effects of European VERs on Japanese Autos

This paper has analyzed implications of the U.K, French and German voluntary export restraints (VERs) negotiated with Japanese carmakers. The paper shows how VERs do not protect domestic industries and probably end up costing consumers more. First, most EC countries followed suit after the British negotiation with Japan in 1976 (the domino effect). Second, the VERs did not arrest import penetration by third countries. When Japanese imports were restricted, the French simply bought Italian and German cars. Third, the Japanese upgraded the quality of cars sold on the French market between 1981 and 1983 (the VER was not strictly binding in France until 1984 and in Germany until 1985). Fourth, between 1979 and 1986, French, German, and Japanese producers supplied an increasingly similar product mix on the French car market, whereas the Italians created a distinctly different type of product. Fifth, in 1984 and 1985 the quota raised auto prices in France about 9%, costing French consumers about 320 million francs and saving only about 300 jobs.