Beyond Japan's car quotas
JAPAN'S renewal of its voluntary auto export quotas for another year comes as welcome news for the American car industry -- although not necessarily for US consumers, who can be expected to pay somewhat higher prices because of the limitation on imports. Still, the two nations should use the auto agreement, now entering its sixth year, as the underlying basis on which to build a more comprehensive policy regarding mutually acceptable trade concessions in general.
Admittedly, Japan's decision follows strident calls on Capitol Hill for just such an agreement. By extending the current quotas for another year, Japan will limit its car exports to the United States to the current annual level of 2.3 million units. Without an extension, the pact would have terminated at the end of March.
For the moment, both nations gain somewhat. Japan, which continues to run up massive trade surpluses against the US, gains some goodwill from Washington and Detroit. Japanese carmakers also benefit, in the sense that they are able to ship their more-expensive -- and profitable -- models to the US under the agreement. The US car industry gains by buying additional time, as it were, to broaden its own market share vis-`a-vis other world producers. The Big Three US auto companies, General Motors, Ford, and Chrysler, recently announced that their 1985 net profits were down compared with 1984.
Although the renewal of quotas meets short-term political and industrial considerations on both sides of the Pacific, the more preferable long-range approach would still be to phase out quotas as forthrightly as possible. Competition is productive, since it impels manufacturers to turn out better products at lower prices. Consumers are benefited by having more choices.
And if the US is to be consistent in opposing trade restrictions abroad -- such as those in Japan -- it hardly makes sense to be imposing restrictions at home, even ``voluntary'' agreements.
US car consumers do have some relief in sight against any possible higher prices resulting from the renewal of quotas. New, low-cost autos are now coming into the US from Yugoslavia and South Korea. Finally, if the US and Japan can get together to work out what appears to be a relatively amicable agreement on cars, they ought to be able to do the same thing regarding other contentious areas of trade.