What is the basic precondition of introducing voluntary export restraints as an instrument of trade policy? Select one – the most appropriate answer.

Question

BlackTom AI · Accepted Answer

The question asks for the basic precondition of introducing voluntary export restraints (VERs) as a trade policy instrument, and asks to select the most appropriate answer.
First, consider what VERs are: voluntary export restraints are informal, negotiated limits on the quantity of a good that can be exported to a particular country, typically agreed upon by exporting and importing governments or by the exporting country with an understanding of the importing country's preferences. This points toward an informal, government-level agreement rather than a formal legal treaty or unilateral action.
In this case, the only provided statement is: 'Informal agreement between the governments of exporting and importing economies.' This aligns with the common characterization of VERs as negotiated, non-binding arrangements rather than binding international treaties or purely market-driven mechanisms. Therefore, the core precondition is the existence of such a bilateral or intergovernmental understandings.
However, there are no alternative answer choices presented to critique. Without additional options, we cannot compare and contrast other possible preconditions (e.g., formal binding agreements, unilateral policy actions, or multilateral tariff schedules). As a result, we focus on why the stated option captures the essential precondition: it emphasizes the cooperative, negotiated nature of VERs between trading partners, reflecting the voluntary and non-binding spirit of these restraints.
If you consider potential misconceptions, a formal bilateral treaty would be more binding than the typical VER arrangement and is not typically required for VERs; a unilateral decision by the importing country would not constitute a VER, since VERs rely on consent or negotiation with the exporting country; and a multilateral agreement is not a standard prerequisite for VERs, which are most often bilateral.
In summary, the central idea is that VERs rest on a cooperative, informal agreement between the involved governments, rather than on formal binding treaties or unilateral measures, which explains why the stated option captures the fundamental precondition.

econ_420_120255_249094 Midterm Exam 2

What is the basic precondition of introducing voluntary export restraints as an instrument of trade policy? Select one – the most appropriate answer.

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