A second Reagan Cabinet member called publicly for some type of temporary limit on Japanese automobile imports yesterday despite bitter opposition from others within the White House who argue such restraints would be inflationary and trigger similar protectionist demands from other industries.
Commerce Secretary Malcolm Baldrige said at a Senate subcommittee hearing that import relief would give the auto industry "running room" until the administration's economic recovery plan had a chance to work.
Transportation Secretary Drew Lewis, who is alred on record favoring some form of import limitations, said yesterday he would favor such measures in the upcoming auto task force report to the president.
"It's very much to the advantage of the auto industry and to the country to have restraints and that will be my position in the report," Lewis said.
Nevertheless, a high Treasury Department official flatly predicted that there is now "a clear trend" against putting any kind of quotas -- voluntary or otherwise -- into effect. He said that when the final decision is made at a Cabinet council after President Reagan returns from Canada, Reagan in effect will say that "the best thing we can do for the auto industry is to get our economic package passed."
The Treasury source also predicted that in addition to opposing any form of quota or orderly marketing agreement, the Reagan administration would offer no special tax incentive to stimulate modernization of the auto industry. "We ought to remain neutral as between industries," he said. "it why we would be spending their tax dollars to prop up autos."
There have been two specific events swinging the thinking away from quotas, despite the hard sell by Lewis and Baldrige that Japan be asked to put voluntary limits on its car exports here. The first was an impassioned plea by Office of Budget and Management Director David A. Stockman last week articulating the free market approach. The second was detailed analysis by the staff of the Council of Economic Advisers, which was discussed at a top-level meeting yesterday morning, reinforcing Stockman's arguments.
The anti-quota forces within the White House are understood to be Secretary of State Alexander M. Haig Jr., Stockman, Treasury Secretary Donald T. Regan and CEA Chairman Murray Weidenbaum.
Baldrige and Lewis testifying before the Senate subcommittee on trade, also said:
The accelerated depreciation plan under Reagan's economic recovery program won't help the auto industry very much until 1985 because the plan largely benefits profits profitable firms. Lewis said General Motors Corp. is the only auto maker that will show a profit this year and will be the only one to benefit from Reagan's investment tax credit plan.
Other tax breaks are still being considered. Administration sources said the task force is still considering nmaking the proposed tax credits refundable, but that is opposed by administration budget fighters for being revenue losers.
The president has made no decisionon whether to impose import restraints. (An administration source yesterday said import limits as low as 1.2 million Japanese cars a year are still being considered by the administration. Last year 1.9 million Japanese cars were sold here.)
The Canadian government, which Reagan is visiting today, wants to be included in any import restraint agreement that may be negotiated between the United States and Japan.
The Japanese are willing to negotiatge the import problem before Japan's Prime Minister Zenko Suzuki visits here in May, as reported last week. But the administration hasn't yet told the Japanese they are willing to negotiate an agreement and they haven't discussed any numerical import limits.
U.S. Trade Representative William E. Brock, who also appeared before the subcommitt4ee, stopped short of advocating import limits. He said he was "reluctant to forgo added tax action," but that chances of refundable tax credits being approved by the administration were slim. "It would set a bad precedent for followup by other industries."
Brock, Lewis and Baldrige said they opposed legislated import limits such as the Bentsen-Danforth bill, which would limit Japanese imports to 1.6 million a cars a year until 1983. Negotiated limited would be better, they said.