COVER STORY
The world's toughest competitor stirs a U.S. trade storm
Like a dazed and bleeding prizefighter trying to call time out in the middle of a round, America's automakers have been pleading for months for relief from the pummeling they have been taking from Japan. While sales of American-made cars have been slumping, Japanese-made Datsuns and Toyotas, Mazdas and Hondas have been streaming through U.S. ports at the rate of some 6,000 vehicles a day. The import flood has given Japan 23% of the entire U.S. car market. General Motors Chairman Roger Smith last week urged a "short-term voluntary" cutback in imports and warned that the alternative was a trade war with Japan. In Washington and Tokyo the Reagan Administration and the government of Prime Minister Zenko Suzuki worked determinedly to settle the most festering trade issue the two countries have faced since World War II.
During the 1980 presidential campaign, Reagan assured autoworkers that he would give relief from the onslaught. But the Administration is now deeply split over the question. Free traders, including Budget Director David Stockman, have argued with a protectionist-minded group headed by Transportation Secretary Drew Lewis over whether to press Japan to restrain imports "voluntarily." Attorney General William French Smith added to the confusion last week by releasing a memo arguing that any such deal would violate U.S. antitrust rules. The Cabinet last Thursday discussed a report that presented options ranging from legal limits on Japanese auto imports to no action at all, but it reached no decision.
Meanwhile in Japan, the Suzuki government tried to pressure its auto companies to restrain exports. Foreign Minister Masayoshi Ito said that he was "determined" to keep the issue from developing into a more serious political one. The Japanese fear that the auto confrontation will upset Prime Minister Suzuki's visit to Washington in early May. As an advance man for that visit and a conciliator on the auto problem, former Prime Minister Takeo Fukuda traveled to Washington last week and met with President Reagan.
The Japanese car companies so far have been resisting all government pressure to hold down exports to the U.S. But Katsuji Kawamata, chairman of Nissan Motor Co., maker of Datsuns, hinted that they might accept some compromise in order to head off even tougher U.S. action. Said he: "We cannot continue to act as if we couldn't care less what is happening over there."
What is happening, of course, is the rapid deterioration of a major American industry. Detroit's automakers last year lost more than $4 billion, and during the past three years, U.S. annual auto production has slumped by 30%, to 6 million vehicles. Today almost 200,000 American autoworkers are unemployed, and many of them have little hope of ever returning to work in their industry. To them and to most U.S. auto executives, the problem is Japanese imports. Since 1975, annual sales of Japanese cars in the U.S. have jumped from 800,000 to 1.9 million.
The trade issue has taken on such importance because of the auto industry's key role in the economy. One out of five American workers is employed either directly or indirectly in making, servicing or selling cars; and industries like steel, glass and rubber are heavily dependent upon