The US car industry: a victory for free trade

The landmark decision by the US International Trade Commission rejecting import quotas and higher tariffs on Japanese car makers adds up to a significant victory for the principle of free trade as well as for the American consumer. At the same time the split 3-to-2 decision provides a basis for the United States and Japanese governments to continue efforts to resolve what has become a major problem for US car makers -- the growth of Japanese imports.

Such imports have increased substantially in recent years. They now account for close to a quarter of total domestic auto sales. Each of the big three US manufacturers, meantime, posted financial losses during the third quarter of this year, while industry unemployment remains high at about 200,000 workers. For dealers, the 1980 car year has been difficult indeed, with over 1,600 firms going out of business -- the largest number recorded in almost two decades.

Still, in rejecting arguments from the Ford Motor Company and the United Auto Workers that import restrictions should be imposed against Japan, the ITC found that imports by themselves were not causing serious injury to US manufacturers. Rather, the trade panel ruled, the economic downturn, along with a shift in public buying tastes from larger to smaller cars, were the major contributors to Detroit's present woes.

Now that the ITC has spoken on the industry's call for restricting imports, the decks are clear for responsible bodies to review other matters claimed to be injurious by the industry. These include various mileage, safety, and toxic emission standards which some automakers have sought to reduce or delay. Some tentative steps toward a review are already underway by lawmakers. It goes without saying, however, that such beneficial standards should not be lightly changed.

There is little likelihood of congressional or White House action on the import question until next year, when the new 97th Congress and the incoming Reagan administration will have to grapple with the auto issue. On this score there are a number of alternatives that policymakers will want carefully to weigh, including encouraging the Japanese to press forward with plans to locate plants in the US, as well as persuading Japanese firms to exercise caution in their export policies. Above all, the import problem calls for continuing mutual discussion between two good friends -- and valued trading partners.