New US import curbs fan debate over protectionism
If you want to see the costs of protectionism, they are on display at imported-car dealerships. At a Honda dealer in Arlington, Va., for example, you'll have to pay $1,000 over the factory sticker price for a Civic model station wagon and $3,000 over sticker for a souped up Accord sedan.
''It's supply and demand,'' a salesman explains. ''We haven't been able to get enough cars for years.'' Under a 1981 agreement designed to protect the US car industry, Japanese auto exports are limited to 1.68 million cars annually.
The costs and benefits of protectionism are the subject of increasing debate here. One reason is that the government recently has moved to protect some domestic industries, including speciality steel and heavy-duty motorcycles. And Congress is contemplating legislation that would mandate a high percent of local labor and materials in cars sold in the United States.
''I would not jump to the conclusion that there is some wave of protectionism ,'' warns Robert P. Lipsey, an economist with the National Bureau of Economic Research (NBER) in New York. The level of protection in an economy is difficult to measure, he notes.
''It is too early to tell whether (recent trade decisions) represent any clear pattern of protectionism in the US,'' adds William Schwarz, an international economist with Manufacturers Hanover Trust.
Still, there is reason for caution. Protectionism ''tends to increase when things are tough,'' says University of Pennsylvania economist Irving Kravis. ''Thus far the recovery has had limited effects on employment, and that is where the pressure (for protection) is coming from.''
The latest action to shield US industry came July 5, when the Reagan administration imposed four years of curbs on imports of foreign specialty steel. Specialty steel has great strength and heat resistance and is used in aerospace and oil-refining applications, among others.
Failure to take action against steel imports would be ''inviting an explosion in the country and Congress that would be reminiscent of Smoot-Hawley,'' US Trade Representative William E. Brock told reporters. The Smoot Hawley Tariff Act of 1930 pushed US tariffs to their highest level in history and played a major role in reducing world trade.
The even more controversial subject of auto imports is also heating up in the wake of a June 30 statement by Sosuke Uno, the Japanese trade and industry minister, that Japan would not extend its auto export curbs past March 1984. The voluntary curbs took effect in April 1981 and were extended in February 1983.
Rep. John D. Dingell (D) of Michigan says the Uno statement substantially improves the chances for House passage of his automotive-domestic-content legislation. HR 1234 would require foreign automakers to use high proportions of US parts and labor in cars sold in this country.
Even opponents of the measure say Mr. Uno's statement will help the labor-sponsored push for local-content legislation. ''[But] I still don't think it will pass,'' says Commerce Secretary Malcolm Baldrige, a leading critic of such legislation.
Last year local-content legislation cleared the House, but was not taken up by the Senate. The outlook for Senate approval this year is dim, and President Reagan, who could veto the bill, has called it ''a cruel hoax.''
But the President is not opposed to all protection measures. On April 1 he ordered a tenfold increase in tariffs on heavyweight motorcycles to protect the Harley-Davidson Motor Company of Milwaukee.
Harley-Davidson had been badly hurt by a tide of bikes imported by Honda, Kawasaki, Suzuki, and Yamaha. The government estimated that as a result of the protection measures heavyweight-motorcycle prices would rise about 10 percent in the first year of the five-year tariff and another 12.5 percent the second year.
Other costs of protection are not immediately visible. Setting up tariff or quota barriers ''creates a protected market, and protected markets tend to create economic inefficiency, and that can add substantially to costs,'' says Mr. Schwarz, the Manufacturers Hanover economist.
And since import barriers allow domestic producers to raise prices, ''the industries which use the (affected) products are at a disadvantage'' in competing for sales in the world market, notes Mr. Lipsey, the NBER economist.
If a country subsidizes exports, the country buying the subsidized exports appears to benefit, since it may get a product at less than its cost of production. ''But it destroys the local industry in the area,'' Mr. Schwarz notes. And in the event of a future supply cutoff, ''you find yourself with no industry in that area.''
Concludes Secretary Baldrige: ''There is no completely free trade in the world. . . . To get freer trade, sometimes we have to take some steps that are simplistically called protectionism.''