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Voluntary Import Expansion is a policy under which one country (Japan) agrees to import a minimum quantity of a commodity from another country (U.S.) It turns out that Japan is better off under an equivalent export subsidy; the U.S. is better off under a VIE; and the welfare of a third-country is higher under a policy which improves its terms of trade. The "optimum" VIE for the U.S. results in a trade equilibrium point where the U.S. offer curve is of unitary elasticity. We also consider the case of a U.S. export which is a Giffen good in Japan. [ABSTRACT FROM AUTHOR]

This paper employs several methods to estimate the trade creation and diversion effects of EC enlargement. Treating the original EEC and EFTA each as one country it compares total and external imports and the ratios of these imports to consumption between 1970/71 and 1977/78. The comparable figures for U.S., Canada and Japan are used as a 'normalizer'. Based on several approaches, 1978 trade creation is estimated at $28 billion and diversion at $5 billion, with an implied substitution elasticity between European and non-European sources of 32 The results are consistent with independent estimates constructed for the period 1959/60 to 1977/78, namely, the two stages of integration combined. [ABSTRACT FROM AUTHOR]

Replies to the comment of Christopher Clague of an article on the static effects of EEC enlargement on trade flows. Estimation of expected trade diversion; Effects of expected trade creation on trade diversion; Use of elasticity of substitution to estimate expected displacement of imports.

Professor Wood argues that in relating percentage changes in the quantity imported to percentage changes in the effective tariff rates, the author deviated from the traditional concept of elasticity which assumes unchanged input prices. Since import-demand is the difference between domestic demand and supply of the commodity at various prices, any change in input prices would shift the supply function and distort the elasticity estimate. In an attempt to shed some preliminary light on it, in the case of finished manufactures imported into the United States, the author regressed the volume of these imports on: real GNP; the ratio of the import price index to the domestic wholesale price index of finished manufactures and the domestic wholesale price indexes of crude materials and intermediate materials, where all variables were expressed in logarithm form. In an alternative regression, the import price indexes of the input variables were used.