Stop Sign: An end to auto import quotas

When it comes to world trade, temporary can mean a long time. Four years ago, Japanese automakers “voluntarily” agreed to limit exports to the U.S. for two years. The Japanese government assigned each of eight companies a strict quota on the number of vehicles it could ship to the U.S. The total exported each year was 1.8 million cars. The restrictions, of course, were not really voluntary, since the Japanese firms acted only to stop the U.S. Congress from imposing even tougher controls. The restraints were twice extended for a year, but last week President Reagan announced that they were finally being eliminated. He said that he would not seek to have the Japanese extend the controls when they expire at the end of this month. To do so, he said, would work against the “wisdom of maintaining the principle of free and fair trade.”

The Japanese companies actually have done well under the restrictions. Since they could export only a limited number of autos, they began shipping more expensive premium models rather than small economy ones. In addition, Japanese firms could raise prices on their small cars because they were often in short supply. If there were no restraints, one U.S. study said, the average Japanese car would have cost $1,300 less in 1984.

Thanks in part to less Japanese competition, Detroit’s automakers climbed out of the grim trough of recession. They earned profits of $9.8 billion in 1984, vs. a loss of $4.2 billion in 1980. Last year the carmakers’ sales rebounded to 7.9 million cars, vs. a paltry 5.7 million in 1982. In his announcement, the President complimented Detroit’s automakers on their “improved performance.” Allowing the Japanese controls to come off seemed to make no sense to most Detroit auto executives. Said Chrysler Chairman Lee Iacocca: “This is a sad day for America–for American workers and American jobs.”

In announcing that he would not ask for a renewal of controls, Reagan made it clear that the U.S. wants “reciprocal treatment by Japan.” The Japanese were not surprised. Said one auto executive: “No one in our industry is stupid enough to believe that there are no strings attached to this decision.” The U.S. will be looking to Japan to allow more U.S.-made goods, including forest products and telecommunications equipment, into its market.

So far, the Administration is not getting much cooperation in those areas. By April 1, for example, the Japanese are scheduled to issue a set of trading regulations dealing with telecommunications equipment made by foreign firms. The Japanese, though, have not produced the regulations. Says Commerce Secretary Malcolm Baldrige: “All we hear is rumors, and the rumors are really bad.” So annoyed was Baldrige, in fact, that he considered not sending Lionel Olmer, his Under Secretary for International Trade, to a second series of talks this week with the Japanese over telecommunications trade. Baldrige said that the Japanese once more wanted to talk about “fundamentals.” He added: “We have been talking about that for six months. What we need is the nitty-gritty of what the telecommunications rules and regulations are going to be.”

Washington officials are increasingly annoyed at Japan for not opening more markets to U.S. firms. Missouri Republican John Danforth, who heads the Senate’s International Trade Subcommittee, reflects a growing mood. Said he: “The U.S. has been a sort of benevolent chump. We should find some specific means of inflicting at least some economic pain on the Japanese.” Even after the end of controls, Japanese automakers may find that the U.S. is not a very friendly market.