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Edited by William A. Kerr and James D. Gaisford
Chapter 22: Import Quotas and Voluntary Export Restraints
22 Import quotas and voluntary export restraints Stefan Lutz Introduction Import quotas1 are limitations on the quantity of a particular good that can be imported into the country within a speciﬁed time.2 Import quotas are administered by a domestic government agency.3 Quotas may be absolute quotas in the sense deﬁned above or they may be tariﬀ-rate quotas. In the latter case, the quota amount can be imported at a reduced tariﬀ rate. Both types of quotas can be set globally or against speciﬁc countries. A total import prohibition eﬀectively amounts to a quota of size zero. If the quota is implemented by the government of an exporting country, then it is called a Voluntary Export Restraint (VER). Typically, VERs are requested from a speciﬁc exporting country because the importing country’s industry seeks protection. Therefore, VERs are often negotiated bilaterally. The degree of ‘voluntariness’, hence, depends on the relative bargaining power (economically and otherwise) of the countries involved. As long as neither quotas nor VERs are sold, the economic eﬀects of quotas and VERs are largely the same. Therefore, VERs will only be discussed explicitly in this chapter where signiﬁcant diﬀerences arise.4 The remainder of this chapter is organized as follows. The next section gives an overview of theoretical research on quota eﬀects. The third section analyzes quotas under perfect competition. Quotas on import competition in the presence of domestic market power are presented in the fourth section. This is followed...
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