DP475 European Community External Protection and `1992': Voluntary Export Restraints Applied to Pacific Asia

Author(s): Carl B Hamilton
Publication Date: November 1990
Keyword(s): 1992, Article 115, Clothing and Apparel Industry, Eastern Europe, Trade Policy, VERs
JEL(s): 421, 422, 423
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=475

The paper investigates one aspect of the external trade impact of the 1992 `Internal Market' programme, that is, VERs on third countries. The paper rejects the frequently-made claim that the proposed abolition in 1992 of Article 115 of the Treaty of Rome (which prevents free intra-EC circulation of third country goods) will have a liberalizing effect. This is a general point. In particular, the paper analyses changes over time in the restrictiveness of existing VERs on Hong Kong clothing, focusing on the VERs' impact on import tariff equivalents, rents transferred and intra-EC price dispersion. The paper reports estimates of the relationship between home-country income growth, exporting-country supply conditions and the import tariff equivalents of VERs. This estimated relationship is used to forecast the increased restrictiveness of VERs caused by the `internal market's' tendency to boost import demand. Finally, the paper outlines the likely consequences of opening up Eastern Europe: the impact promises to be considerable.