Unless he watches his step, Reubin O'D. Askew, the former Democratic governor of Florida who recently became the president's special representative for trade negotiations, may have to rename his office the ministry of protectionism.
Askew made a comment the other day that can be described, most charitably, as unfortunate and, more harshly, as reckless. The New York Times, was that "Japan could face restrictions on car sales in the United States if it does not follow the European example and invest in a major automotive manufacturing operation here."
The Times interview was tucked away in the paper's back pages, where it was likely to be noticed only by members of Congress, auto executives, diplomats and the Japanese. But they could interpret it in only one of two ways: either as a sign of Askew's inexperience -- an ill-considered, offhand response to a reporter's question-- or as an important shift in U.S. trade and foreign economic policy. One hopes the former.
No doubt, many Americans will find Askew's warning appealing. We have suffered a huge psychological jolt in the past decade -- a jolt emphasized, most recently, by the Iranian seizure of the U.S. embassy in Tehran. Now we often are at the mercy of foreigners who share neither our interests nor our values.
There is a natural nationalistic reaction: a sense we should get tough with foreigners and, at the same time, retreat as much as possible into Fortress America. It is an indiscriminate approach that in the long run won't work. There may be times when we need to get tough, but mostly we need to understand the world better and build stronger ties with traditional allies.
In its own way, Askew's comment reflects the new nationalism. As it applies to automobiles, a more elaborate rationale is to be found in a speech in Tokyo a few weeks earlier by Henry Ford II -- a speech that Askew strongly endorsed. Ford reminded his audience that Japan exported $17 billion worth of cars in 1978 and that almost half the total came to the United States, representing about one-third of Japanese imports here. In return, Japan's imports of U.S. cars totaled only $200 million.
Ford said Americans have legitimate concerns about the jobs represented by those Japanese exports. Ford then deplored import restrictions in the same way that a man holding a gun to your head deplores violence. Far better that Japan should defuse the issue by investing in the United States and brnging some of those jobs here, he said. In short, act like Volkswagen, which has established an assembly plant in Western Pennsylvania and is considering a second plant in the United States.
Ever since the Times story, spokesmen for Askew have been asserting that his comments were taken out of context, saying that he wasn't threateing the Japanese with quotas, but simply urging them to avoid such pressures by pursuing an enlightened policy of anticipation. t
But all of Ford's sugar-coated rhetoric or Askew's reasonable-sounding disclaimers cannot disguise the essentially protectionist character of their proposition. Ford is not complaining about Japanese "dumping" or "unfair" subsidies. What bothers him is that, even after ocean transportation, the Japanese have a significant cost advantage over comparable U.S. cars: about $500, according to a company estimate last year. Labor costs explain most of the difference; in 1978, Japan's hourly wage rate of $6.54 was about half of America's, according to the Labor Department.
Understandably Ford is worried that as American cars become smaller and more fuel-efficient, direct competition from the Japanese -- in a portion of the market that essentially has been ceded to foreigners -- will be devastating. Profit margins may be forced down further, U.S. firms may lose sales (imports recently have averaged more than 20 percent of total sales), or both. Naturally Ford would like to sabotage his competition by loading them with higher labor costs, difficult factory start-up problems or import restrictions. h
But to compare the Japanese with Volkswagen is superficial and deceptive. By the early 1970s, German labor costs -- combined with the appreciation of the mark -- had risen so high that Volkswagen rished pricing itself out of the U.S. market. Indeed, when the company finally decided to locate here, it had been found informally to be "dumping" -- selling cars here at lower prices than in Germany. In short, its decision reflected real, intense economic pressures.
A Japanese firm ultimately may decide to locate here, but it should do so on the basis of economic, not political, considerations. About a fourth of Japanese production comes to the United States. Companies cannot shift such capacity in a wink. The five major Japanese importers also compete fiercely among themselves; a wrong decision by one risks a large loss of sales to others.
It is not Askew's job to clothe the self-interested aims of the U.S. firms with the respectability of public purpose. The automobile industry is beginning to look distressingly like the steel industry. Its corporate leaders simply find it too difficult to contain the central source of higher costs -- rising labor rates -- and, therefore, use the "burden" of federal regulation to justify asking government for protection against the consequences of their own timidity.
There is more at stake here than the virtues of open trade: lower prices, more pressures for innovation, greater consumer choice. We live in a world where our relative power has eroded substantially, but we are now too dependent on outsiders to isolate ourselves.
We need to preserve and enlarge our sphere of influence by revitalizing ties with traditional allies. Good relations cannot exist with Japan without good trade relations. Japan's large trade surplus with the United States -- which has declined in 1979 -- has acted to weaken our ties, and Askew is correct in reminding the Japanese (if that was his purpose) about the practical political hazards of this.
But the way to remedy this imbalance is to continue prodding the Japanese to open up their own markets, not to embrace the protectionist inclinations of American business or labor. Nothing could be better calculated to excite Japan's traditional island insecurities. If we retreat into economic nationalism, so will others.