Distinguish between a voluntary export restraint and a quota

Distinguish between a voluntary export restraint and a quota.

Solution

Quota refers to fixing the maximum limit on the imports of a commodity by a domestic producer. The fixation of quotas by the government help in restricting the level of imports. As a result, the domestic firms could expand without fear of competition from the foreign market.

Voluntary export restraint (VER) is the limit imposed by government on the quantity of some category of goods that can be exported to a specified nation during a specific period of time. In other words, VER is basically trade restriction on quantity of goods that exporting nation is allowed to export to other nation.