Export Quota Allocations, Export Earnings and Market Diversification

Countries facing voluntary export restraints (VERS) often adopt a two-tier allocation system for export licenses to the restricted market: (1) a "basic " allocation related to export shares to the restricted market; and (2) an "open " allocation based on export shares to the nonrestricted market. Such a two-tier allocation system increases exports to the nonrestricted market beyond the levels which would exist under a single-quota allocation system and has an efficiency cost as it results in some sales being made at less than marginal cost. The history of VER negotiations provides a rationale for such a policy and suggests that the recent increase in antidumping cases may be partly associated with the adoption of two-tier quota allocation systems. Nontariff barriers (NTBS) present a growing threat to a liberal world trading system and slow the relocation of mature industries from developed to devel-oping countries. Among NTBS, voluntary export restraints (VERS) are prolifer-ating and constitute a major element of the "new protectionism." Besides measuring the incidence of NTBS, research has concentrated on three aspects of VERS: the welfare cost to the imposing country, their attraction fo