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Voluntary Restraint Agreement Japan

A surprising realization of Berry et al. is that, contrary to the prevailing wisdom, the effect of the VER program was only significant during the period 1986-90. The authors note that export restrictions had, for the most part, no impact on prices and quantities observed from 1981 to 1983 and had little effect in 1984 and 1985. It appears that the 1981-82 recession, coupled with high interest rates, weighed so heavily on car sales that restrictions did not limit Japanese sales to the United States. It was not until 1986 that the program began to bite, as the economic recovery, lower interest rates and a sharp drop in gasoline prices stimulated demand for new cars. A voluntary export restriction (VT) is a trade restriction on the amount of a product that an exporting country is allowed to export to another country. This limit is set by the exporting country itself. As part of the Voluntary Export Restriction (VE), this is a voluntary expansion of imports (VIE) that changes a country`s economic and trade policy to allow more imports by reducing tariffs or reducing quotas. COUNTRY is often part of trade agreements with another country or is the result of international pressure. A voluntary export restriction (VT) or voluntary export restriction is a government-imposed limit on the quantity of a class of products that can be exported to a particular country for a period of time. They are sometimes referred to as “export visas.” [1] When the U.S. auto industry was threatened by the popularity of cheaper, less fuel-intensive Japanese cars, a 1981 voluntary restraint agreement limited the Japanese to export 1.68 million cars a year to the United States, as established by the U.S. government.

[2] Initially, this quota was to expire after three years, in April 1984. However, in the face of a growing trade deficit with Japan and pressure from domestic producers, the U.S. government extended quotas for an additional year. [3] The ceiling was increased to 1.85 million cars for this additional year and to 2.3 million in 1985. Voluntary deduction was lifted in 1994. [4] Recent research (Berry, Levinsohn and Pakes, 1999) now gives us a clear picture of the overly predictable impact of this restriction on free trade: by limiting the supply of cars from Japan, export restrictions have increased Japanese car prices.