Car quotas: four years is enough
Japan and the United States deserve plaudits for the compromise reached between the two Pacific trading partners over the issue of Japanese auto exports to the US. Japan sought to import 1.9 million cars to the US for the year beginning next April 1. The US held out for 1.8 million units.Skip to next paragraph
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The two sides split the difference - at 1.85 million units, up from the current l.68 million level.
By reaching an agreement, the diplomatic desks were cleared of one potentially contentious issue before President Reagan's trip to Japan later this week.
The agreement (which adds a fourth year to a prior three-year limitation on Japanese imports) makes sense in that Detroit is only now coming out of recession.
That recession - and downturn in overall auto sales - happened as Detroit was undergoing costly new retooling programs to make the US industry more competitive.
Does that mean, however, that permanent limits should now be put in place on Japanese imports, as a number of US car officials and union leaders are urging? Hardly. The Reagan administration is on solid ground in wanting to do away with the quotas after they expire in March 1985.
It is already clear that the quotas - by holding down the inventory of Japanese cars available in an expanding economy - will have the effect of boosting the price of cars in general.
Given strong consumer preference for Japanese cars, many of the imports will most likely be sold at a premium for early delivery. And without the additional imports, US firms will be able to hold up their own prices - or even hike them.
Detroit would seem best served by using this fourth year of quotas as a breathing space to make its own products more competitive. But after that, the quota walls should tumble.
Who knows, that might even bring down a sticker price here and there.
A final point seems in order. The Senate should reject the ''domestic content'' legislation passed by the House last week.
The measure, strongly backed by the United Automobile Workers union, requires that imports be built with a large percentage of American-made components and labor.
Such a measure is hardly conducive to the mutuality and trust needed between two trading partners.