PRESIDENT REAGAN apparently has decided not to extend the quotas on imports of Japanese cars. The White House says that the future of the quotas is up to the Japanese. That's merely an attempt to perpetuate the fiction that the quotas are voluntary restraints exercised by Japan. The Japanese government won't be able to maintain tight limits on the automobile companies' exports in the absence of an explicit American requirement. The pattern of imports will now shift from the precise numerical quotas of the past four years to a much fuzzier sort of understanding that permits a rising volume of Japanese cars to come into the country but (probably) discourages sudden surges.
Why get rid of the quotas? You might note a recent coincidence. On the same day last week that the Chrysler Corporation announced record profits, the federal International Trade Commission published its report on the effects of the quotas. By holding down the number of Japanese cars, the quotas push up the profits of the American automobile manufacturers. The three big American auto companies -- General Motors, Ford and Chrysler -- together reported $9.8 billion in profits in 1984. The cost of the quotas to American consumers, according to the ITC, was $8.5 billion.
Not all of that $8.5 billion went to the American companies. The Japanese companies and their American distributors got $3.3 billion of it. The import quotas constitute a gigantic subsidy from American automobile buyers to both the Japanese and American producers. It's not a conventional subsidy, since it doesn't pass through any public budget. But it's real money. The ITC calculates that last year the average price of Japanese cars sold here was $1,300 higher than it would have been without the quotas, and the average price of American cars was about $650 higher.
The purpose of the quotas was to save jobs in the American automobile industry. In that respect, the quotas have been fairly effective. Employment in the auto industry is currently just about where it was in 1981, when the quotas were first imposed. That, the ITC says, is about 44,000 jobs higher than it would have been without the quotas.
Isn't that a good thing? Yes, for auto workers. But not for other workers. By keeping out Japanese cars, the quotas aggravated the overvaluation of the dollar's exchange rate and increased its impact on other American industries that do not enjoy the benefits of quota protection. Quotas don't save jobs. They just move unemployment from one industry to another.
With the auto import quotas, the Reagan administration established an international cartel -- one that, in its cost to the American consumer, now ranks second only to OPEC. Mr. Reagan speaks fervently of his confidence in open markets. And -- as he sometimes puts it -- if not now, when?