Maintaining Open Markets in the Global Economy
Chapter 4: Government Sponsored ‘Voluntary’ Co-operation
I INTRODUCTION Through the successive GATT rounds of international trade negotiations substantial progress was made to free the world trading system of the traditional restrictions such as tariffs and quotas. However as these impediments were removed governments came under increasing pressure from special interest groups for assistance in the face of intensifying foreign competition. From the 1970s until the 1990s there was consequently an explosive growth of non-tariff barriers to trade. These were given a series of respectable sounding names, such as Orderly Marketing Arrangements (OMAs) and Voluntary Export Restraints (VERs), but their common purpose was to restrict imports, protect domestic industry and thus distort international trade. Many governments were simultaneously supporting GATT efforts to reduce formal trade restrictions and, often covertly, engineering these more informal restrictions. While the effects of these arrangements were broadly similar to those of tariffs and quotas, more significant for our purposes was the boost they gave to collusive behaviour both between groups of exporting firms and in many instances between exporters and domestic producers. This chapter therefore complements Chapter 3 which dealt with more conventional stimulants to collusion. Section II of this chapter describes the most common forms of these restrictions and discusses their effects. Section III then assesses their impact when they were at their height and outlines the measures taken in the Uruguay Round to deal with them. II THE EFFECTS OF ‘VOLUNTARY’ RESTRAINTS We need first to define our terms. OMAs are informal agreements between governments to restrict the volume of...
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