Tough Tangle over Trade

Reagan ponders a restriction on Japanese car imports

Should the U.S. attempt to rescue its auto industry by restricting the import of Japanese-made cars? That was the knotty question that faced President Reagan last week. The Governors of eight auto-producing states, led by William Milliken of Michigan, met with the President in the White House to ask for negotiations toward a "voluntary" Japanese reduction of auto imports. Meanwhile, the Reagan Cabinet, at a meeting last week, split into sharply divided groups over the issue of import controls.

The issue is a thorny one for Reagan. Although philosophically a free trader, the President, during a campaign swing through Michigan last year, vowed to help the auto industry. Aides indicated at the time that he favored a voluntary agreement with the Japanese to reduce imports. After the election, Reagan asked Transportation Secretary Drew Lewis to review a study of the auto industry that had been completed by the Carter Administration. Results of the review will be submitted to the President within two weeks.

Last year the Japanese exported 1.9 million autos to the U.S., or nearly one-quarter of all cars sold in this country. But while Japanese sales are comparatively buoyant, Detroit's have been sinking badly. The American auto industry last year lost a staggering $4.2 billion. As a measure of their desperation, the Big Three U.S. automakers now offer buyers cash rebates of $500 to nearly $1,800 a car. That move has resulted in some short-term gains; sales during the last ten days of February leaped 21%. But industry observers are fearful that the rebates are artificially stimulating sales, which will come crashing down once the incentives are ended.

The Reagan Cabinet is now almost evenly split on the auto issue between protectionists and free traders. Trade Representative William Brock said last week that he still supported unrestricted trade, but added, "Sometimes you have to take a step or two backward before you can move forward." Murray Weidenbaum, chairman of the Council of Economic Advisers, had another view about that step. He told the Senate Banking Committee that any import limitations would be a "backward step at a time when economic policy is being geared to reducing the degree of Government intervention in the marketplace." Reagan Cabinet members now favoring relief for Detroit are: Brock, Lewis, Commerce Secretary Malcolm Baldridge and Labor Secretary Raymond Donovan. The free traders lined up against them are: Weidenbaum, Budget Director David Stockman and Treasury Secretary Donald Regan. Secretary of State Alexander Haig at first did not take a position, but he eventually opposed restrictions on the grounds that they could disrupt international commerce and cause serious diplomatic repercussions.

The movement to limit Japanese imports is also gathering strength on Capitol Hill. The International Trade Subcommittee of the Senate Finance Committee will begin hearings this week on a bill sponsored by Lloyd Bentsen of Texas and John Danforth of Missouri to restrict the sale of Japanese cars.* The Bentsen-Danforth Bill would limit Japanese auto imports to 1.6 million cars annually for the next three years. While that proposal is not now expected to pass Congress, it will keep pressure on the Japanese to agree to a voluntary restriction.

President Reagan seems determined to let all sides air their views before declaring his own position. Said a White House staffer last week: "The oldest and wisest is keeping his own counsel." But with the pressure building rapidly, the President will soon have to make a decision.

*Despite their proposed legislation, both Senators own Mercedes.

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