Voluntary restraint arrangement
Voluntary restraint arrangement: VRA. A bilateral arrangement whereby an exporting country (government or industry) agrees to reduce or restrict exports so that the importing country does not have to use quotas, raise tariffs or impose other import controls. VRAs have been used for steel, cars, semi-conductors and other products in so-called sensitive sectors. These arrangements are voluntary only to the extent that the exporting country wishes to avert an even greater threat to its trade and therefore chooses the lesser of two evils. VRAs not only deny the benefits of comparative advantage to efficient suppliers. They can also lead to an inefficient allocation of resources because industries affected by them may be forced to invest in less efficient markets to retain access to them. Another possible outcome is that they give exporters and importers windfall profits because of lessened competition. Miachael Kostecki has proposed a useful three-part framework for considering the reasons underlying the imposition of export quotas under VRAs. First, there is the home-industry approach under which a certain minimum level of projected domestic demand is allocated to
Source: http://ctrc.sice.oas.org/trc/WTO/Documents/Dictionary%20of%20trade%20%20policy%20terms.pdf
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Author of the text: W. Goode
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