A Cabinet-level committee unanimously recommended Tuesday that President Reagan let Japan decide whether to continue the so-called voluntary restraints on Japanese auto sales to the United States for a fifth year, Administration sources said.
The recommendation, the first Administration decision in one of the most explosive trade issues of recent years, will become an element in the overall review of the United States' trade relations with Japan that resulted from Reagan's Jan. 2 meeting with Prime Minister Yasuhiro Nakasone.
Reagan "is more concerned about opening Japanese markets than in how to advise them on auto restraints," a White House official said. "He is looking at this in the overall trade context. He is comfortable with not moving specifically" on auto restraints.
Thus, the recommendation by the Cabinet Council on Commerce and Trade will not go directly to Reagan but, instead, will be tied to the Administration's larger efforts to open Japanese markets to highly competitive American products.
The recommendation that the President take an essentially passive position on import quotas for Japanese cars came as key congressmen, organized labor and all of the four major U.S. auto makers except General Motors Corp. pressed the White House to continue past March 31 the restraints that now limit Japan's U.S. auto sales to 1.85 million cars a year.
While presidential spokesman Larry Speakes refused to reveal Tuesday morning's decision of the Cabinet council, he hinted broadly that Reagan may do nothing when the restraints end.
"It could be no decision" is required, he said. Extending the quotas for a fifth year "is a decision for the Japanese to make," he added. Other sources, revealing the Cabinet council's recommendation, said one factor was the healthy state of the U.S. auto industry.
Pressures on the White House to push to renew the auto quotas intensified with the publication last month of the United States' record $123.3-billion trade deficit, with Japan responsible for the largest single share of it, $36.8 billion.
Japan's auto sales of $20 billion amounted to more than half of the trade deficit and one-third of all Japanese exports to the United States. But the International Trade Commission estimated the total deficit would have been $4 billion higher without the restraints.
The cost of auto restraints, however, has been high. The ITC reported last week that the four years of quotas cost the American consumer $15.7 billion while saving 44,000 auto workers' jobs. The restraints also raised the cost of each Japanese car sold in the United States by about $1,300 and allowed American auto makers to charge $600 more for their products last year, the ITC found.
"Reagan knows there are two sides to this in the United States," a White House official said. It doesn't really matter what Reagan said because the Japanese know they have to use restraint, he said. "If they don't and if they flood the U.S.," Congress would respond with protectionist legislation, he said. Japanese auto makers and government officials, in conversations with the Administration, have said that they want the limits lifted and have indicated that they will police themselves by keeping their exports to reasonable levels.