2. In 1980 the United Auto Workers (UAW) and Ford Motor
Company petitioned the InternationalTrade Commission
(ITC) to recommend relief from import competition
During the first half of that year foreign car companies
shipped 1.2 million passenger cars to the United States
increase of 21 per cent over the previous year
The foreign share of the US new car market increased
from 17 per cent to 25 per cent in that period
3. American Motors sold out to Renault
Chrysler made huge losses and was forced to sell most of
its foreign subsidiaries
Ford made even larger losses
General Motors had to borrow large sums to keep afloat
By the end of 1980, 193,000 out of 750,000 members of
the UAW were unemployed
4. The ITC rejected the appeal
1st Theory
The problems of the motor industry were due to a shift in
demand to small, fuel-efficient cars caused by higher petrol
prices
Japanese car imports were perceived as having better fuel
economy, engineering and durability
This was supported by a survey of 10,000 US households carried
out by the Motor and Equipment Manufacturers Association
Supporters of this theory felt that imports should not be
limited
5. 2nd Theory
Price differences created by labor cost differences were
the cause
Bureau of Labor Statistics estimated that average
Japanese car workers’ wages and benefits in the first half
of 1979 were only half those of US car workers
Those supporting this theory largely favoured taxing
imports in order to raise their prices
6. The arguments for protecting or aiding the US motor
industry were based on two main premises:
The first was that the costs of unemployment were higher
than the increased costs to consumers of limiting imports
The second was that the US manufacturers could recover
and become fully competitive with imports if they were
given temporary help
7. The first issue involved an estimation of the hardships of
being unemployed, the adverse effect of their lost
purchasing power on other industries, and the higher
taxes necessary to support the unemployed
A NewYorkTimes poll showed that 71 per cent of
Americans felt that it was more important to protect jobs
than to get cheaper foreign products
8. The second issue related to the past performance of US
manufacturers, the possibility of achieving economies of
scale and higher productivity with new plants
Ford, for example, estimated that the conversion of its
Dearborn engine plant would cost $650 million but would
increase productivity by 25 per cent
9. Those who rejected the idea of protection, like the
ITC, blamed the managers of the US companies for their
bad decisions
They claimed that these managers and firms should not
be rewarded at the expense of the consumer and
taxpayer, who would not only face higher prices and
taxes, but also suffer from limited choice
10. The UAW was mostly concerned about maintaining jobs
rather than protecting the profits of the manufacturers
They thus pushed for foreign manufacturers to produce in
the United States and to have 75 per cent of their parts
produced in the US
The UAW gathered much public support and, was
successful in 1981 in obtaining a ‘voluntary’ agreement
with Japan to limit car exports to the US to 1.68 million
units a year for three years
11. Japanese producers and politicians entered the
agreement fearing that lack of cooperation could result in
even stricter limits
When the agreement expired, Japan continued to limit
exports, but by that time the major manufacturers like
Honda,Toyota and Nissan already had plants in the
United States and sales from these soon outnumbered
imports
12. The US car industry did recover, but some of this was due to the
economy moving out of recession
US consumers switched back to consuming more expensive
and profitable cars, but this was partly an effect of the import
restrictions, which gave US consumers little choice except to
buy more expensive cars
The limits on Japanese imports were in quantity not in value;
therefore Japanese firms redesigned their cars to make them
more luxurious and expensive
In the same period the prices of US-made cars increased by 40
per cent
