Voluntary Restraint Agreement Japan

These results immediately require at least two questions. Given that the restrictions do not increase Japanese profits, why have Japanese producers been so anxious to accept them? The authors believe that the likely alternative to the program was a U.S. tariff on Japanese cars – which would have cost Japanese automakers more than $11 billion in 1986-90. 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 planned 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] In May 1981, when the U.S. auto industry was in recession, Japanese automakers agreed to limit passenger car exports to the United States. This voluntary export deduction (VER) program, initially supported by the Reagan administration, allowed only 1.68 million Japanese cars per year to the United States. The cap was increased to 1.85 million cars in 1984 and 2.30 million in 1985, before the program was discontinued in 1994. Voluntary export restrictions fall into the broad category of non-tariff barriers, such as quotas, sanctions taxes, embargoes and other restrictions. As a general rule, VERs are the result of a request from the importing country to grant a protection premium to its domestic companies that manufacture competing products, while these agreements can also be concluded at the sectoral level. The main effects were felt between 1986 and 1990. During this period, restrictions (mainly quotas) resulted in the prices of Japanese cars sold in the United States increasing by an average of about $1,200 (1983), about 14% higher than they would have been without the restrictions. 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.