Bilateral Restraint Agreement

Bilateral Restraint Agreement

Summary of Bilateral Restraint Agreement

Any agreement, understanding, or program involving governmental authorities, producers, trade associations, or labor unions in one country and their counterparts in another country to control or limit trade in specified products. Generally, such agreements arise where one nation finds that domestic producers of a given product have lost substantial market share in their home market to producers concentrated in one or a few foreign countries. The importing country, confronted with the loss of jobs at home due to foreign competition, will urge the foreign exporters to reduce or halt exports for a period of time so that the injured domestic industry will have an opportunity to recover. The foreign producer is threatened with economic reprisals (such as increased duties or quotas) should there be a failure to comply with the request for ‘voluntary’ controls on exports. Depending upon the circumstances, bilateral restraints may take any of several forms:

Orderly Marketing Agreement-a restraint agreement concluded between the United States and the government of the foreign producer. The authority to negotiate such agreements is vested in the president in section 203 of the Trade Act of 1974. Negotiations are conducted for the president by the United States trade representative. Orderly marketing agreements are limited initially to a period of five years from the date of the presidential proclamation, and the relief accorded must be phased down after three years unless it is found by the

president that to do so would be inimical to the national interests. Should such a finding be made, import relief granted under the agreement could be extended for three more years. U.S. law permits the conclusion of agreements limiting exports to the United States only with foreign governments.

Voluntary Export Restraint-a restraint agreement, between governments, within the context of the Multifiber Agreement.

Voluntary Restraint Agreement-an agreement be-tween a government and a nonofficial body (such as a supplier, labor union, or trade association), or between two nonofficial bodies, to limit exports. The legality of such agreements has been challenged in U.S. courts. A 1972 agreement between the U.S. government and foreign steel producers was challenged in the case of Consumers Union of the United States vs. Kissinger (506 F. 2d, D.C. Cir., 1974). Consumers Union asserted that the State Department lacked legal authority to conclude a restraint agreement with any party other than a government and in so doing illegally impeded com-petition in steel to the detriment of American consumers. The conflict was resolved when Congress passed a special act to retroactively authorize the steel pact.

To clarify the legal position of any future agreement between the U.S. government and nonofficial bodies, the attorney general of the United States in a letter to the U.S. trade representative, dated February 18, 1981, issued the following opinion: “In summary, this Department believes that although the President has inherent legal authority to negotiate directly with foreign governments to seek import restraints, where such negotiations are implemented through voluntary private behavior serious antitrust risks arise. Foreign or United States governmental ‘approval’, ‘urging’, or ‘guidance’ of such behavior cannot safely be relied on as a defense; if the foreign government does not provide adequate protection by mandating the restraints in a legally binding manner, private antitrust suits could jeopardize the effective implementation of any agreements that are negotiated.”

Products covered by binding orderly marketing agreements are listed in Appendix 9, part 2.A. of the Tariff Schedules of the United States.

(Main Author: William J. Miller)

Bilateral Restraint Agreement and International Trade

Resources

See Also

export restraints


Posted

in

, , ,

by

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *