The Automobile Voluntary Export Restraint Agreement Between the United States and Japan

Abstract

This paper explores the development and impact of the 1981 U.S.­ Japan auto voluntary export restraint agreement (VRA). First we provide an overview of the factors that contributed to the American auto industry's enormous problems in 1980 and which led to the adoption of the auto VRA. We then detail the economic impact of the VRA on the auto industry and the U.S. economy. Then we describe the political development of the VRA with an emphasis on why the VRA was chosen over other traditional policy options that would have been more effective and less costly. In the last section we review the efficacy of the VRA by looking at the competitive position of the American auto industry today relative to that of the Japanese auto industry. We find that the VRA failed to significantly enhance the international competitiveness of the American automobile industry.