export restraints” (VERs) have become the by which the US has “Voluntary sought to cartelize industrial sectors threatened by imports, like textiles and apparel, steel, footwear, television sets, and autos In US, after a deal reached, what happens to negotiated protectionism? Trade barriers do not persist automatically, as is generally assumed Three patterns of protectionism: Temporary US negotiates agreements with one or several exporters, – but allows them to after some initial period Examples: color TV and footwear Institutionalized protectionist agreements expand over time, – becoming more complex and gradually encompassing larger numbers of exporting countries and more categories of products, persisting across administrations Examples: textiles and apparel mid-1950s Sporadic initial agreements but protectionism subsequently – renegotiated Example: industry How to account for patterns? Three key variables: size of the industry, height of economic barriers restricting entry of foreign producers into an industry, and exit or adjustment strategies of domestic firms Negotiated protectionism is NOT the same as tariffs or auctioned quotas Unilateral forms of protectionism attempt to shift the burden of adjustment from an importer to an exporter, while VERs constitute cross-national cartel agreements that seek to allocate market shares between exporters and importers, thereby sharing the benefits and burdens of protectionism VERs restrict exports from specific countries in specific product categories and are generally negotiated on a country-by-country basis High barriers to entry should produce a relatively stable cartel; conversely, low barriers to entry should weaken the effectiveness of a VER because unrestrained foreign producers will immediately begin exporting to the US If high barrier to entry, expect protection will be temporary in initial round; if firms can exit, protection will not be renewed; in industries with high barriers to exit: if they do not adjust, will lead to renewed protectionism If low barrier to entry: If protectionism to raise profits for a domestic industry, then firms will increase the intensity of their demand for future trade barriers and the US government will generally be sympathetic towards supplying additional protection If trade barriers improve an industry's economic health, then firms in that industry will reduce the intensity of their lobbying efforts, and the government will be less receptive to those pleas Aggarwal (1985): protectionism” case “Institutionalized Textile and apparel industries followed a joint strategy in securing protection from imports since the late 1950s Eisenhower administration opted for VER with just one country, Japan, in 1957
“Voluntary export restraints” (VERs) have become the by which the US has sought to cartelize industrial sectors threatened by imports, like textiles and apparel, steel, footwear, television sets, and autos In US, after a deal reached, what happens to negotiated protectionism? Trade barriers do not persist automatically, as is generally assumed Three patterns of protectionism: Temporary – US negotiates agreements with one or several exporters, but allows them to after some initial period Examples: color TV and footwear Institutionalized – protectionist agreements expand over time, becoming more complex and gradually encompassing larger numbers of exporting countries and more categories of products, persisting across administrations Examples: textiles and apparel mid-1950s Sporadic – initial agreements but protectionism subsequently renegotiated Example: industry How to account for patterns? Three key variables: size of the industry, height of economic barriers restricting entry of foreign producers into an industry, and exit or adjustment strategies of domestic firms Negotiated protectionism is NOT the same as tariffs or auctioned quotas Unilateral forms of protectionism attempt to shift the burden of adjustment from an importer to an exporter, while VERs constitute cross-national cartel agreements that seek to allocate market shares between exporters and importers, thereby sharing the benefits and burdens of protectionism VERs restrict exports from specific countries in specific product categories and are generally negotiated on a country-by-country basis High barriers to entry should produce a relatively stable cartel; conversely, low barriers to entry should weaken the effectiveness of a VER because unrestrained foreign producers will immediately begin exporting to the US If high barrier to entry, expect protection will be temporary in initial round; if firms can exit, protection will not be renewed; in industries with high barriers to exit: if they do not adjust, will lead to renewed protectionism If low barrier to entry: If protectionism to raise profits for a domestic industry, then firms will increase the intensity of their demand for future trade barriers and the US government will generally be sympathetic towards supplying additional protection If trade barriers improve an industry's economic health, then firms in that industry will reduce the intensity of their lobbying efforts, and the government will be less receptive to those pleas Aggarwal (1985): “Institutionalized protectionism” case Textile and apparel industries followed a joint strategy in securing protection from imports since the late 1950s Eisenhower administration opted for VER with just one country, Japan, in 1957
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