Voluntary Restraint Arrangement
Voluntary restraint arrangement in Global Commerce Policy
In this regard, a definition of this issue is as follows: VRA. The entries on trade policy are here. A bilateral arrangement whereby an exporting country (government or industry) agrees to reduce or restrict exports so that the importing country does not have to use quotas, raise tariffs or impose other import controls. VRAs have been used for steel, cars, semi-conductors and other products in so-called sensitive sectors. These arrangements are voluntary only to the extent that the exporting country wishes to avert an even greater threat to its trade and therefore chooses the lesser of two evils. VRAs not only deny the benefits of comparative advantage to efficient suppliers. They can also lead to an inefficient allocation of resources because industries affected by them may be forced to invest in less efficient markets to retain access to them. The entries on trade policy are here. Another possible outcome is that they give exporters and importers windfall profits because of lessened competition. Miachael Kostecki has proposed a useful three-part framework for considering the reasons underlying the imposition of export quotas under VRAs. First, there is the home-industry approach under which a certain minimum level of projected domestic demand is allocated to producers in the importing country. Second, under the exporters-first approach a certain maximum level of exports is fixed and the rest of the market left to producers in the importing country. Third, the risk of demand fluctuation in the importing country is shared equally between domestic producers and foreign suppliers. The WTO Agreement on Safeguards makes new VRAs illegal, and all those in existence on 1 January 1995, when the WTO was established, had to be phased out within five years.[1]
Voluntary restraint arrangementin the wold Encyclopedia
For an introductory overview on international trade policy, see this entry.
Resources
Notes and References
- Dictionary of Trade Policy, “Voluntary restraint arrangement” entry (OAS)
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