No to Curbs on Japanese Cars

But even in Tokyo, talk of voluntary restraint is rising

In Detroit 1980 was the year the U.S. auto industry launched a do-or-die campaign against imports. Commercials have pitted new, small, front-wheel-drive cars against foreign competitors in bumper-to-bumper comparisons, as automen tried to fight their way out of an 18-month sales slump. Last week, however, they lost a major battle in their campaign. After 19 weeks of inquiry, including 44 hours of public hearings, the U.S. International Trade Commission ruled 3 to 2 against an argument by Ford and the United Auto Workers' union that the tide of overseas autos, particularly Japanese models, ought to be curbed by Government.

The five commissioners agreed that the U.S. auto industry, which so far this year has lost $3.7 billion and laid off 181,000 employees, or 23% of its usual work force, has been hurt badly. But under U.S. trade law, imports can be restricted only if the ITC finds them to be as big a factor as any other in causing the industry-wide malaise. The commission did not. The three members who formed the majority (all of whom happen to drive foreign cars) judged that the business slump and the rising popularity of gas-sipping models were more to blame. Said Commissioner Paula Stern, 35, a Carter appointee and former legislative aide in the Senate: "I have found that economic conditions--recession, the credit crunch, rising costs of car ownership--and a major, unprecedented shift in demand from large to small cars brought the domestic industry to its present weakened state."

The case was the biggest ever laid on the 64-year-old ITC, which acts as an investigative arm for the White House in cases of import-troubled industries. If the commission rules for protection, as it has done in 27 of the 44 cases it has handled since 1975, the matter goes to the President for a decision on whether to impose restrictions on foreign products. The Carter Administration's record in acting on ITC verdicts, however, has been mixed.

The President tried unsuccessfully to get the ITC to make its decision before the election, to show his concern for Detroit's problems. Now that the commission has ruled against the U.A.W.-Ford petition, the initiative has passed from the White House. Congress can impose import curbs, but despite strong efforts by Midwestern Congressmen, sentiment for such action may be ebbing.

Businessmen and other students of trade mostly approved of the ITC ruling, if only because they feared that restrictions on auto imports could set off an intercontinental trade war. Says Economist Beryl Sprinkel, of Chicago's Harris Bank: "Limiting auto imports would not be the end of it. If we start down that road, the whole world can.play the game."

Undeniably, Detroit's woes are acute. So far, consumer reaction to its new small cars has been tepid. In October, Chrysler's sales were 6% above a year ago on the strength of its K-cars. But Ford was off 20%, despite the debut of its Escort and Lynx subcompacts, and slipped an additional 8.5% in early November.

Ford has led the drive for import curbs because its up-to-now weak lineup of small cars has made it more vulnerable to imports than either Chrysler or General Motors. Ford's market share has slumped badly this year, from 21% to 17%. Says Chairman Philip Caldwell: "The U.S. can't afford the continuing exploitation of our market by the Japanese." GM, which has maintained its 46% market share, opposes trade barriers in favor of voluntary restrictions. But Chairman-designate Roger Smith fears that the ITC decision would take the clout out of any future trade negotiations. Said he: "In many respects, the ruling just makes the problem more difficult."

Not surprisingly, the Japanese cheered the ITC ruling. H. William Tanaka, Washington counsel for the Japan Automobile Manufacturers Association, said it could be interpreted as a "victory for those who favor deregulation of the economy." Left unsaid was whether that might include the new Administration.

Both Ford and the U.A.W. will continue to fight for import limits. Ford's Caldwell flew to Washington last week to urge legislators to pass a bill permitting the President to negotiate curbs with the Japanese. Although several trade-restriction bills are pending in the Congress, any action during the current lameduck session is highly unlikely.

The issue will be left for Ronald Reagan to deal with. The President-elect spoke out strongly during the campaign for auto-industry aid, including such measures as an easing of regulations on emissions and safety but did not mention import restrictions. However, Reagan emphatically believes that free trade must be fair trade. He says it is better for the U.S. "to aggressively pursue a reduction in foreign nations' trade barriers rather than to erect more barriers of our own." Once in office, he might push for voluntary curbs by Japan.

The Japanese have been watching U.S. developments carefully, aware that protectionist feelings could erupt in the new Congress. While their share of U.S. auto sales this year has climbed to 27.7%, up from 21.7% during the same period in 1979, the Japanese talk publicly about maintaining "orderly" markets while Detroit shifts production to smaller cars. Nissan President Takashi Ishihara noted last week that a recent drop in shipments to the U.S. is likely to continue. Said he: "We will exercise caution in exporting automobiles to America, while watching trends on the U.S. market."

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