Economics Dictionary of ArgumentsHome
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| Voluntary Export Restraints: Voluntary Export Restraints (VERs) are trade restrictions where an exporting country agrees to limit the quantity of goods exported to another country. These are typically negotiated to avoid more severe import restrictions like tariffs or quotas and are often politically motivated rather than economically efficient. See also International trade, Trade policy, Strategic trade policy._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Alasdair Smith on Voluntary Export Restraints (VER) - Dictionary of Arguments
Krugman III 69 Voluntary Export Restraints (VER)/Alasdair Smith: The model* allows there to be a “voluntary” export restraint (VER) which limits the share that firms from one country may have in a particular national market (as Japanese firms are currently restricted in several European national markets. The model can alternatively allow there to be a restriction on the firms’ overall market share in a group of national markets as a whole, as Japanese firms are in the near future to be restricted to a fixed share of the aggregate EC market). Competition: Firms in markets that are not subject to sales restrictions are assumed to behave as Cournot competitors**(…) >Cournot Competition, >Bertrand Competition. Krugman III 70 In the general case, the anticompetitive effect of the VER is less strong but still leads firms to set higher price-cost margins than they would in the absence of the VER. Krugman III 73 Strategic trady policy: (…) I address the question of whether the national VERs on Japnese imports can be seen, from the viewpoint of the European Community as a whole, as an effective strategic trade policy. Krugman III 75 The imposition of the VERs leads to an increase in model numbers by one each by the two French producers, the two “American-European’’ producers, and VW, while each of the Japanese producers reduces its model numbers by two. Krugman III 77 There is a marked effect on con sumer welfare: the increase in model variety combined with price increases that are generally lower than when model numbers are fixed reduces the loss in consumer welfare to 6,000 million ECU per year in table 3.4, compared with 9,000 million in table 3.3. However, not only is this loss still in excess of the gains to European producers, the producers’ gains are actually lower in table 3.4 than in table 3.3. *** Voluntary export restraints/VER: The VERs are counterproductive as a strategic trade policy in shifting profits toward European producers. The reason for this is easy to see. The change in model numbers is optimal for each individual producer, taking the other producers’ model numbers as given, but the change in all producers’ model numbers is profit-reducing, as intensified competition among European producers more than outweighs the beneficial effects of the reduction in Japanese competition. This is an example of the problem identified by Dixit (1984)(2) of the weakening of the strategic case for import restrictions as the number of “home” firms increases. When we look at policy from an EC point of view it might seem more natural to look at an EC-wide strategic trade policy rather than the EC-wide effects of national trade policies. Krugman III 80 A National VER as Strategic Trade Policy: 1) there is no guarantee in a many-country world that the benefits of a strategic trade policy imposed by one country will accrue to that country’s own producers. 2) Second, the location of the strategic effects are quite sensitive to the values (…) chosen in the calibration. The location of the strategic effects is therefore sensitive to an aspect of model specification on which we are ill informed. >Sensitivity analysis, >International trade/Alasdair Smith, >Strategic trade policy/Alasdair Smith, >Competition/Alasdair Smith, >Models/Alasdair Smith, >Economic models, >New trade theory. * The model ist displayed in A. Smith 1994(1). ** ((s) In the economics of oligopoly, the and Bertrand models explore different ways firms can compete. Cournot models focus on quantity competition, where firms choose output levels, while Bertrand models focus on price competition, where firms set prices. In Bertrand competition, firms making identical products often reach an equilibrium where prices are equal to marginal costs, leading to zero economic profits. In contrast, Cournot competition typically leads to higher prices and positive profits for firms, as they limit their output to maximize profits.) ***For the tables see A. Smith 1994(1). 1. Alasdair Smith. „Strategic Trade Policy in the European Car Market.“ In: Paul Krugman and Alasdair Smith (Eds.) 1994. Empirical Studies of Strategic Trade Policy. Chicago: The University of Chicago Press. 2. Dixit, Avinash. 1984. International trade policy for oligopolistic industries. Economic Journal 94 (Supplement): 1-16. Alasdair Smith. „Strategic Trade Policy in the European Car Market.“ In: Paul Krugman and Alasdair Smith (Eds.) 1994. Empirical Studies of Strategic Trade Policy. Chicago: The University of Chicago Press._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconSmith I Adam Smith The Theory of Moral Sentiments London 2010 EconSmithV I Vernon L. Smith Rationality in Economics: Constructivist and Ecological Forms Cambridge 2009 EconKrug I Paul Krugman Volkswirtschaftslehre Stuttgart 2017 EconKrug II Paul Krugman Robin Wells Microeconomics New York 2014 Krugman III Paul Krugman Alasdair Smith Empirical Studies of Strategic Trade Policy Chicago: The University of Chicago Press 1994 |
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