Free Trade by Denying Trade


Washington. -- The Clinton administration has seen its duty and vows to do it pitilessly. Japanese automobile manufacturers buy fewer American-made automobile parts than American parts manufacturers deem desirable or than the American government deems moral or legal or sporting or something. So the government is proposing to raise from 2.5 percent to 100 percent the tariff on 13 models of expensive Japanese cars, making them unsalable in the land of the free and the home of the brave.

The administration may be a 98-pound weakling when dealing with Russia, Iran, Cuba, China, North Korea, NATO allies regarding Bosnia, and many others, but it knows how to punish Lexus, Acura, Infiniti, Mazda and Mitsubishi dealers. The 617 such dealers, who have invested an average of $2 million in their businesses and employ an average of 50 people, will be injured or destroyed if the tariffs become final in June.

Mickey Kantor, the U.S. trade representative, vows to be brave about the collateral damage his policy does to others, including consumers.

The administration that says race-conscious policies pave a path to a color-blind society also says this: The use of trade-annihilating tariffs to coerce another government into coercing its automobile industry to alter its procurement polices -- to adopt quantitative targets for purchasing U.S. parts -- is the path to free trade. Trade, particularly pertaining to automobiles, makes many administrations Orwellian. Bill Clinton's administration is emulating one of the Reagan administration's worst policies.

Sixteen days before President Reagan left office the government decreed that jeeps and minivans were actually trucks, not cars, and thus were to have the tariffs on them increased tenfold to 25 percent. Lee Iacocca exulted to Chrysler dealers that this constituted a $2,000 penalty per vehicle on foreign competitors.

President Reagan's administration was ending as it began. On May 8, 1981, Japan's prime minister was in Washington and there was a joint communique: "The president expressed his appreciation for the voluntary action taken by the government of Japan to restrain the export of automobiles to the United States at a time when the United States automobile industry is passing through a difficult adjustment period."

That masterpiece of mendacity meant that Japan, in order to forestall import quotas imposed by Congress, would "voluntarily" frustrate the desires of American consumers for cars better than the ones Detroit was then producing. As James Bovard has written, this rationing of higher-quality Japanese cars was "an indirect bailout for American auto-repair shops."

The International Monetary Fund estimated that this restriction on competition cost American consumers $17 billion in higher auto prices between 1981 and 1984, during which time new-car prices rose 49 percent. Because many consumers were priced out of the new-car market, used-car prices also were artificially inflated. One study estimated that in the mid-1980s Americans bought a million fewer cars a year than they otherwise would have, costing 50,000 American jobs.

Because the Reagan quotas limited only the number and not particular kinds of cars, Japan plunged into the high-profit luxury-car business. Today Japan is alarming Detroit with various new lower-priced luxury cars. However, American purchasers of Japanese luxury cars are more attracted to European than American alternatives, so the Clinton-Kantor tax increase on would-be purchasers of Japanese cars is a subsidy for Mercedes, BMW and Jaguar.

But, you say, what about the trade deficit with Japan? Before assuming it is intolerable and sinister, remember: You have a chronic trade deficit with your grocer: you constantly buy from him, he never buys anything from you.

Furthermore, the Japanese spend billions on American rock music and movies. Quick, now: Name your five favorites among all the Japanese movies you saw last year. Perhaps Japan should insist that the U.S. government require Americans to see a certain number of such movies.

Given nationalism's power to dethrone reason, the Clinton administration's threat of 100 percent tariffs might be popular with the Republican Congress. And perhaps the threat will "work," forcing Japan to agree to "managed trade" in the form of quantitative targets for purchases of U.S. auto parts and even vehicles.

Sixteen years ago, when Congress voted to bail out Chrysler, Alan Greenspan was asked if the plan would work. He replied that the danger was not that it would fail but that it would succeed, thereby encouraging government's interventionist proclivities. If Mr. Kantor's threat "works," the prospect for truly free trade will darken.

And if the tariff goes into effect, what will Mr. Clinton do when the new World Trade Organization, which he sponsored, declares it illegal?

George F. Will is a syndicated columnist.

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