Discuss why an exporting country II, if faced with a choice between a 100-unit import quota by importing country I on a given product or a "voluntary" export restriction by II of 100 units of the product, would choose the VER. Might there be a larger import quota (for example, 120 units) that would be preferred by II to a 100-unit VER? In general terms, what considerations would be involved in this latter choice?

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The Answer is An exporting country II may choose a "voluntary" export restriction (VER) over a 100-unit import quota by importing country I for several reasons.

First, a VER allows the exporting country to maintain control over the quantity of goods being exported, whereas an import quota is imposed by the importing country and may be more difficult for the exporting country to influence. This means that II can potentially avoid the risk of having their exports restricted further in the future by implementing the VER themselves.

Second, a VER may also allow the exporting country to negotiate other trade concessions or benefits from the importing country in exchange for implementing the restriction. This could include reduced tariffs on other products or increased market access for other goods.

Additionally, a VER may also allow the exporting country to avoid the negative perception that can come with import quotas, as it can be seen as a more cooperative and mutually beneficial approach to managing trade.

However, there may be a larger import quota, for example, 120 units, that would be preferred by II over a 100-unit VER. This could be the case if the exporting country has the capacity to produce and export more than 100 units of the product, and a larger import quota would allow them to maximize their export potential and revenue.

In general terms, the considerations involved in choosing between a VER and a larger import quota would include the exporting country's production capacity, the potential for negotiating trade concessions, the perceived cooperative nature of the trade restriction, and the long-term implications for future trade relations with the importing country. Ultimately, the decision would depend on the specific circumstances and priorities of the exporting country.

Discuss Why an Exporting Country II, If Faced with a Choice