So, in the short run if Japan would agree the limitation on the imported Japanes

Question

So, in the short run if Japan would agree the limitation on the imported Japanese steel would cause a domestic shortage of these items. But Japanese companies can respond to the shortage in two ways. They can increase the prices for the us market. They can maintain prices at the current levels and ration sales through delivery delays or they can increase prices for their production in the U.S. But in the long run this would decrease in the firm’s American market shares, the longer the import limits the more probable it becomes, since the increase in unit profits that results from higher prices will hardly counteract the effect of sales losses. So, no matter which policy they go with it will cause a shift in one of the purchaser’s demand to other good which would include domestically produced steel. And the profit from the U.S. producers will rise either with the increase in sales or in price.

Allocation of resources will be less efficient in both the U.S. and Japan

Volume of employment wouldn’t change appreciable in the long run

Price level in the U.S. will rise in the long run

Standard of living do to the decrease in trade it could affect the standard of living do to a change in the income for both U.S. and Japan.

What do you think the long-term results of (VER) Voluntary Export Restriction are, over time do you think both countries would benefit or would there be negative impacts?

Explanation / Answer

The long term results of voluntary export restriction would firstly lead to cheaper price of steel in Japan itself due to surplus of steel. And secondly in would lead rise in price of steel in America, which would demotivate the industrial work in America due to lack of steel and it's higher prices. Which would not be good for the economy and would stagnated the economic growth.

Whereas, it japan, the prices of steel would go down facilitating the industrial work. But at the same time it would reduce their forex reserve.

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