Consumers as Victims--Again
American consumers may be in for yet another economic diddling, to the cheers of the Big Three U.S. auto companies. On Jan. 4 the Customs Service announced that it would stop classifying imported vans and sport-utility vehicles as cars and instead call them trucks--a switch that would work to increase tenfold, to 25%, the tariffs on those vehicles. Such an action, reversing more than 20 years of precedent, would add between $1,500 and $6,000 to the price of each affected import. It would also violate a U.S. commitment to define its duty-eligible products the same way its major trading partners do. Finally--surprise, surprise--it would give the U.S. auto companies still another profit-boosting competitive break.
And so once again protectionism threatens to dip into the pockets of consumers, for no defensible reason. The United States, lest it be forgotten, is about to begin its ninth consecutive year of limits on Japanese car imports, during which time, according to the Commerce Department, foreign-car prices have soared 82% while the average price of a domestic model has risen 61%. If Treasury Secretary Nicholas Brady lets stand the Customs Service ruling, the cost to consumers would be an estimated $1 billion or more, figuring about $500 million in higher prices for foreign minivans and sport-utility vehicles, with a similar amount added from opportunistic price increases by domestic producers.
Last week the chairmen of the Big Three jointly called on Brady not to interfere with the Customs Service ruling, contending that to do otherwise could cost the Treasury hundreds of millions in anticipated tariff revenues. Of the many hundreds of millions more that consumers would have to pay, the chairmen said nothing. Perhaps they felt that it would be unseemly to do so, given the imminent announcement by the auto makers of more than $11 billion in profits last year.
The Big Three have not claimed harm or unfair competition from imports of minivans and sport-utility vehicles, nor is it possible to see how they could: Detroit controls 95% of the U.S. market for minivans and 75% for compact sport vehicles. The real harm inherent in what’s going on would be in America’s relations with its trading partners and in the larceny that would be committed against consumers. President Bush campaigned against protectionism. Very soon, when the Treasury decision comes down on the Customs Service’s ruling, the country will see if he meant it.
