De-Rigging the Car Market
President Reagan’s decision not to ask for an extension of import quotas on Japanese cars contains the implicit promise that a level of competition unseen for years in the auto marketplace will soon be happily restored.
An almost immediate effect should be to check and probably even deflate somewhat the great swelling in new-car prices that has occurred since auto quotas were imposed in 1981. Auto manufacturers on both sides of the Pacific who have profited handsomely from the artificial shortages that the import restrictions created, along with many auto dealers in the United States, have justified their repeated price increases by saying that they were simply responding to market conditions. Indeed they were. The big change now on the way is that those market conditions will no longer be rigged.
Or at least not rigged as crudely as before. Reagan has left it up to the Japanese to decide how many cars to sell in the United States, and the watchword among Japan’s big three auto companies is restraint. Though all want to increase their U.S. sales, none want to encourage a threatened protectionist backlash in this country by in-cautiously shipping all the cars that they probably could sell.
It’s a different story with Japan’s six smaller car makers, each of which is eager to get a bigger share of the U.S. market. What is already clear is that three of these companies--Subaru, Isuzu and Mitsubishi--can look forward to considerable expansions of their American sales. That’s because their American affiliates--General Motors in the case of Subaru and Isuzu, Chrysler in the case of Mitsubishi--have announced plans to import at least 400,000 subcompact cars between them.
That intention adds to the pressure being brought by the Japanese government on car manufacturers to come to an orderly agreement for marketing in the United States. Probably such an agreement will emerge and Japanese car exports, while they will certainly rise well above their present level, will continue to fall somewhat short of potential American demand. That is not the best news for car buyers, but the decision to end import quotas certainly is better news than what they have had in a long while. Over that time the American auto companies have had the opportunity to modernize, to improve the quality of their products, to earn fresh or renewed loyalties from their customers. Now they will have the opportunity to start competing again in a freer market. There is no reason why they shouldn’t be able to do so, and there is every reason why consumers should gain by that competition.
