DP324 | The Effects of Voluntary Export Restraints on the Prices of UK Imports of Footwear

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01/07/1989

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Abstract

Voluntary export restraints allow exporters to increase the prices they charge importers for supplying goods. This paper quantifies this effect for the UK restrictions on imports of footwear imposed in the later 1970's, by isolating changes in the relative prices of exports to the UK and to other markets. Where exporters appear to have little ability to switch supplies between markets the comparisons are made after allowing for movements in real exchange rates. Where, on the other hand, exporters can substitute easily between markets, the comparisons refer to nominal prices. VERs increased UK footwear import prices by 15%-25% for the major restricted suppliers and in 1980 cost the UK economy at least 25 million pounds.