Pros, Cons of Barring Japan Cars Described

Associated Press

Restrictions on Japanese automobile exports to the United States gave U.S. companies a chance to develop new cars, but the hold-down was costly to the U.S. consumer and helped the Japanese auto industry too, acting U.S. Trade Representative Michael B. Smith said Monday.

“The amounts of cash amassed in profits by the Japanese producers were growing . . . faster than the normal expectations and therefore were being plowed back into the research and development costs faster than one would have expected,” Smith told a congressional hearing.

The bulk of the profits came from sales to the United States and financed research and development to make the Japanese industry more competitive, he told the Joint Economic Committee’s trade subcommittee.

After four years of limits on Japanese exports to this country, imposed under pressure from the U.S. government, the Reagan Administration said it had decided not to ask for another year. The Japanese government increased the limit on exports to this country to 2.3 million vehicles for the year April, 1985, through March, 1986, up from 1.85 million the year before.


Smith said: “The Japanese auto export restraints have largely achieved their intended purpose--to provide a breathing space for the U.S. manufacturers to introduce new, more fuel-efficient products, improve quality and productivity and restore profitability.”

Cost Consumers $16 Billion

He said the restrictions also helped the American companies meet their investment targets, cut fixed costs and create 44,000 to 105,500 new jobs in this country. But he noted that the cost to the U.S. consumer has been estimated as high as $16 billion over the four years.

Sen. John H. Chafee (R-R.I.) said that there are only 26,000 new jobs and that each one cost $160,000 to create.


For the long term, the restrictions will have only transitory effects on the U.S. auto market, Smith predicted.

But, for other industries, similar restrictions may be needed in the future with judgments on the merits of each case, he added. He explained that international rules do not cover all cases and urged that an effort be made to get an international agreement that would include such “gray areas.”

Smith reported progress in the talks he held last week in Japan. He said efforts to get Japan to take more U.S. farm products were the ones proceeding most slowly. U.S. officials are trying to get reductions in Japanese tariffs that Smith said give Japanese farmers too much protection from imports.