Helping the Hogs

Reagan hikes a tariff

By instinct, Ronald Reagan is no friend of protectionism, and he has gone to some lengths to prove it. His Administration has consistently attempted to blunt the intentions of some protection-minded members of Congress concerned with high levels of domestic unemployment. The President firmly believes that, as he has put it, "free trade serves the cause of economic progress and the cause of world peace." But even an ardent free-marketeer can make exceptions. Last week Reagan did, in a way that brought surprise and outrage from Japanese officials. Slapping an elevenfold increase on American tariffs for, of all things, imported heavyweight motorcycles, Reagan declared in an Executive memorandum that the action was "consistent with our national economic interests."

The Reagan move benefited exactly one U.S. firm: Milwaukee's Harley-Davidson Motor Co. Harley, perhaps best known for its big-engine "hogs," is the sole remaining U.S. manufacturer of the two-wheeled machines that have long been synonymous with American rebelliousness, restless individualism and the freedom of the endless highway.

In imposing the tariff, Reagan was following the recommendation of the U.S. International Trade Commission. In January, the I.T.C. agreed with Harley that the company needed temporary relief from the big wheels of Yamaha, Suzuki, Kawasaki and Honda. Since 1978, H-D has lost more than a third of the big-bike market (engines of more than 700-cc displacement) to the Japanese. According to Harley-Davidson Chairman Vaughn L. Beals, 1982 sales of about $200 million were down 20% from the preceding year. One reason for the Japanese success is pricing: Harley's top-of-the-line touring model lists for $8,600, while the comparable Honda Aspencade costs $7,000. According to Harley, the Japanese were charging artificially low prices to increase their U.S. market share, and in addition had glutted the U.S. market by exporting far more heavyweight bikes than dealers could sell in a recession (some 160,000 last year).

In essence, Harley pleaded for time to adjust to the competition. The new tariff provides it. The duty will leap upward from the current 4.4% to 49.4% effective April 15, then scale back gradually over the next five years. As a result, according to the I.T.C., the prices of Japanese bikes should rise 10% this year and an additional 12.5% in 1984.

H-D Chairman Beals pronounced himself "overjoyed" at the measure, as well he might be. The Japanese also reacted sharply to what they saw as a sharp kick in the pillion. Charging the U.S. with an unfair trade practice, the Japanese threatened to take their case to the 88-member General Agreement on Tariffs and Trade in Geneva. This file is automatically generated by a robot program, so viewer discretion is required.