Pat Choate's new book, "Agents of Influence," charges that Washington lobbyists for Japanese interests have been able "to manipulate the policies of the U.S. government to their own benefit, despite the damage done to American workers and industries."
One of his prize exhibits relates to a car-truck tariff case in 1988-89. This "Victory No. 1," Choate says, deprived the Treasury "of more than $500 million a year in duties and adds that much to the federal budget deficit."
His charge is that the Treasury, pushed by lobbyists for Japanese companies, overruled the Customs Service and allowed Japanese light trucks to enter the United States as if they were cars, paying a 2.5 percent tariff instead of the 10-times-higher 25 percent rate applicable to trucks.
This simply doesn't square with the facts: For some of the vehicles in question -- the Jeep-like Suzuki Samurai and similar imports -- the Treasury confirms that it ruled in exactly the opposite way, upholding the Customs Service, changing what had been a 2.5 percent duty to 25 percent.
The Treasury did overturn the Customs Service's strange decision to define minivans as trucks. Minivans (unless they have no windows) are not trucks but people-movers -- in effect the successors to the last generation's station wagons.
Here's Choate's account, from his book: Because "transplant" car production in the United States left Japanese import quotas unfilled in early 1988, "the Japanese hit on the idea of reclassifying light trucks as cars." When "this abuse" became apparent, Commissioner of Customs William von Raab began a review process, and in January 1989 "ruled that the light trucks could not be classified as cars." After a huge lobbying campaign, Treasury Secretary Nicholas Brady caved in: "Within 45 days of von Raab's ruling, the Treasury Department overturned the Customs Service decision and reclassified light truck imports as passenger cars."
Choate credits "Victory No. 1" to a group of lawyers, especially John B. Rehm of Dorsey & Whitney who represented the domestic subsidiary of Suzuki. In a letter Oct. 3 (not yet published) to the Harvard Business Review, which had printed an extract from the Choate book, Rehm labeled Choate's narrative "fiction."
Here's Rehm's account, from his letter and conversations with me: It was not the importers who sought a change in the customs rules in 1988, but congressmen acting on behalf of American carmakers. For about 20 years, the Customs Bureau distinction between cars and trucks was simple: Motor vehicles with seats and passenger amenities in the rear area (such as carpeting, dome lights and ashtrays) were defined as cars, and those lacking seats, etc., in the rear area were trucks.
"In the summer of 1988, the importers learned that customs was giving thought to changing its long-established practice for distinguishing cars and trucks for tariff classification purposes," Rehm wrote the Harvard Business Review. When von Raab issued his ruling, it changed the old distinction, classifying utility vehicles and minivans as trucks subject to the 25 percent duty.
Rehm and other lawyers appealed to the Treasury. His letter continues: "Treasury's decision did not classify light trucks as passenger cars (as Choate says it did). Instead, it essentially provided that sport-utility vehicles and small vans would be classified as passenger cars only if they had rear doors and windows and rear seats... . . In particular, Treasury's decision was a blow to importers of Japanese motor vehicles, since it caused several Japanese models to be reclassified as trucks at the high 25 percent rate. In short, Mr. Choate would have your readers believe the opposite of what actually happened."
John Simpson, who as Treasury deputy assistant secretary is the agency's expert on tariff and trade matters who made the decisions in the car-truck tariff dispute, said in an interview that Rehm's account of the controversy is "essentially right."
Moreover, he said, the Treasury decision was initiated "without any prodding at all" from outsiders because the customs ruling was considered far off the mark.
A critical question remains: What triggered the 1988 customs review? The answer seems to be that old devil, competition.
Industry sources note that Chrysler had recently bought the declining American Motors Corp., largely to pick up its successful line of Jeeps. But Suzuki had introduced the Samurai, a utility vehicle built more like a truck, which proved to be a lively competitor to the Chrysler Jeep. Japanese companies also moved strongly into the minivan market, again hitting an important revenue-earner for Chrysler.
So there is a domestic lobby as well as a Japanese lobby.
Choate's assertion that the car-truck case demonstrated that "Japan had more political strength in Washington than Ford, Chrysler, General Motors and their dealerships combined" appears to be seriously flawed. The net result, after the Treasury decision, seems more like a standoff.
A final point: Choate suggests that "Victory No. 1" cost taxpayers $500 million because a 25 percent tariff on $2 billion worth of imports was disallowed. You don't need a Ph.D. in economics to conclude that this is simplistic and a gross exaggeration: A 25 percent tariff, if made effective, obviously would have dramatically contracted the market.