Economic analysis of voluntary export restrictions.

Summary By entering into a voluntary export restraint (VER), a government, an industry lobby or the producers of an exporting country commit themselves to private or public agents in the importing country to limit their supply of a particular good for export to the market in question. Why, then, has the rve become widespread since the 1970s, knowing that it is the worst, or almost the worst, situation in terms of welfare for the importing country, and knowing that the rve is negotiated at the initiative of the importing country. In the presence of competitive production structures, only the fear of retaliation makes this quantitative restriction "voluntary". With oligopolistic production structures, the interest in the dream depends on: its restrictiveness, the nature of the restricted goods (complementary or substitutable for unrestricted goods). the strategic variable. the conjectural variables prior and subsequent to the dream. the number of firms. the degree of product differentiation. The dream is preferred to traditional protection because it acts on the conjectural variables. But the preference for the rve over other non-tariff barriers (NTBs) is more problematic because these NTBs also modify the strategic interactions between firms. The discriminatory nature of the rules makes them ineffective, and therefore strictly necessary, since new ones must be negotiated. Indeed, first, dream expectations are generally self-fulfilling and deprive domestic firms: the dream creates the situation it aims to correct. When the dream expectation leads to dumping, the anti-dumping procedure can be concluded by a legal dream. Secondly, since the rve is circumvented in the long run through reorganizations of trade, production and factor endowments, the extension of its coverage, sectoral and geographical, becomes necessary. A computable general equilibrium model quantifies non-marginal changes in the rve for France in 1985 (decomposed into 14 sectors). The rve are suboptimal for France because the French welfare increases with their abandonment, and increases even more with their pricing: the latter is sought by the importer. With the 1994 GATT reforms, legal protections or more private dreams are likely to replace government dreams.