Showdown on Car Imports
Who wants to keep restrictions on the number of Japanese cars that can be sold in the United States? For one, the United Auto Workers union, which fears that higher foreign-car imports could cost its membership jobs. For another, the Chrysler Corp., which worries that greater competition could reduce sales of its smaller models. These are familiar advocates of protectionism. Now they have been joined by some new and seemingly curious allies. They come from Japan’s Foreign Ministry and powerful Ministry of International Trade and Industry, and they are playing their own kind of game against American manufacturers and consumers.
The game involves a kind of trade-off on trade. Japan is under strong American pressure to lower its own import barriers to such goods as wood pulp and paper products, medical apparatus, telecommunications equipment, pharmaceuticals, and computers and software. Some American companies are eager to expand their market in Japan for these products. Some Japanese companies are no less eager to keep tight limits on potential foreign competition. These companies are not without political influence in the government. Thus the deal that has now been hinted at: Tokyo quietly accepts further limits on U.S. car sales; Washington pipes down about Japan’s import policies.
The Reagan Administration, which is nearing a decision on whether to seek a fifth year of car-import quotas, could do nothing better than ignore this hint and let the quotas pass unmourned when they expire on March 31. The Administration of course is right to press Japan to open up its market to American exporters who want only the chance to legitimately compete there. But that has little to do with the auto quotas that have cost American consumers so dearly.
The measurement of those costs can be seen in new-car prices, which have risen nearly 50% in the four years since import quotas were introduced. It can be seen in the millions of Americans who have found themselves priced out of the new-car market as less expensive autos have all but disappeared and car dealers have rushed to add as much as $2,000 to the sticker prices of available popular models. When someone pays exorbitantly, someone gains. The big gainers have been the American auto companies. The last two years of protectionism have won them record profits, including profits of more than $10 billion in 1984 alone.
Advocates of continued protectionism claim that without quotas the Japanese would flood the market with cheaper cars and undercut the economic recovery achieved by American auto companies. Without quotas imports would certainly rise, as they properly should, given demand, but Japan’s car makers have already signaled their intention to keep a ceiling on that rise, knowing that to do otherwise could invite legislative retaliation. There is, in short, less to fear from increased imports than some would have the public believe, but there is also much to gain that protectionists don’t like to talk about.
The single most important fact about the auto quotas is that they have represented a multibillion-dollar subsidy by consumers to the auto industry, paid for by price rip-offs and restricted freedom of choice in the marketplace. For four years quotas have constituted a socially irresponsible and economically damaging policy. The moment to end this abuse is at hand.
