Handbook on International Trade Policy
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Handbook on International Trade Policy

Edited by William A. Kerr and James D. Gaisford

The Handbook on International Trade Policy is an insightful and comprehensive reference tool focusing on trade policy issues in the era of globalization. Each specially commissioned chapter deals with important international trade issues, discusses the current literature on the subject, and explores major controversies. The Handbook also directs the interested reader to further sources of information.
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Chapter 22: Import Quotas and Voluntary Export Restraints

Stefan Lutz


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 by an extensive treatment of quotas in...

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