Trade curbs have a mixed success record

March 22, 1992|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau

Washington -- Trade protection has one literally roaring success story -- the Harley-Davidson motorcycle.

America's one-company heavyweight motorcycle industry is doing so well today because it was given tariff protection in the 1980s against an invasion of Kawasakis, Hondas, Yamahas and Suzukis.

In 1983, when tariffs were imposed on imported motorcycles with 750 cc or larger engines, Harley-Davidson's U.S. market share was 23 percent. Today it is 63 percent and, the recession notwithstanding, demand continues to outstrip supply.

The tariffs, according to Ken Schmidt, a company spokesman, were important for two reasons: They signaled that Harley-Davidson, which has a manufacturing plant in York, Pa., was determined to stay in business. And they warned the Japanese against "predatory" dumping.

Other U.S. industries besieged by foreign competition over the years, including autos, textiles and steel, have been protected by tariffs or import quotas or both, to give them a chance to modernize and revitalize. The question behind all trade restraints is whether they work. Can they save an industry or do they merely prolong its demise? And at what cost?

The apparel industry, for instance, remains in enduring jeopardy despite more than 30 years of protection.

Low wages in Third World countries make the labor-intensive clothes-making sector particularly vulnerable. High technology and increased productivity improvements cannot be its salvation. Should it be saved or allowed to perish?

"If we lose our apparel industry, which we would if we removed all trade protection, we would also start to lose textiles," said Thea Lee, economist at the Economic Policy Institute, a centrist Democratic think tank.

"It is just a conscious decision we need to make. Do we want to have an apparel industry and a textile industry? They may look like disposable industries. . . . I don't think it is necessarily in our interest to just give away those industries."

Kim Elliott, trade policy analyst at the non-partisan Institute for International Economics and co-author of "Trade Protection in the United States, 31 Case Studies," estimates that between 20 percent and 25 percent of all imports are affected by trade barriers. According to her 1984 estimate, which she is updating, import restraints cost $53 billion.

That's because restraints, by limiting foreign competition, keep prices higher than they would be in an open market.

It also costs money to save jobs. The cost of retaining a single job in protected industries these days can be as high as $100,000, and most of the protected industries continue to decline, if at a slower rate, according to Ms. Elliott.

For protection to be in the national interest, it has to be temporary, giving the company or industry a long enough respite from competition to make itself viable but not so long that it allows the company to settle into inefficient security, she said.

In 1983 Harley-Davidson sought and was given five year's tariff protection against foreign imports. Four years later it was confident and competitive enough to ask the Reagan administration to lift the tariffs a year early.

"Harley-Davidson is the only industry -- in this case company -- to receive trade relief and ask for it to be lifted before it was necessary to do so," said Ms. Elliott.

TC The Congressional Budget Office in a recent report on the textile and apparel industries found that between 233,000 and 291,000 jobs would be lost if tariffs and the Multifiber Arrangement, which restricts imports, were removed. But the benefit to the economy -- the gain to the consumer over the loss to industry -- would be $2.6 billion.

New global quotas on imports of textiles and apparel have been regularly advanced by Congress but vetoed by President Bush. According to the CBO, they would cost the U.S. economy $31,000 to $38,000 for each job retained -- more than the $16,400 annual average yearly earnings for textile workers and the $12,436 for apparel workers.

"Quotas are a costly means of helping the workers in these industries," said the report.

The Bush administration is committed to free trade. It is pushing for new international agreement on lower trade barriers in the Uruguay round of talks under the General Agreement on Tariffs and Trade, which could eliminate all protection for textile and apparels.

It is also forging a North American Free Trade Agreement with Canada and Mexico.

"Our policy is to ensure that foreign markets that are open stay open, and markets that are closed are made accessible to competitive U.S. exporters and investors," said Carla A. Hills, the U.S. Trade Representative in her 1992 trade policy agenda.

U.S. trade action

The U.S. imposes bilateral trade restraints on these five major items:

Steel: Anti-dumping action. Voluntary restraints cover 75 percent of U.S. steel imports. Ends this month, new negotiations with 37 countries under way in Geneva.

Machine Tools: Imports deemed threat to U.S. industry, national security. Voluntary restraints on Japan, Taiwan, expired December 1991. New agreement under negotiation.

Semiconductors: Anti-dumping action. Japan recently agreed to open up to 20 percent of its market to foreign imports.

Lumber: 1986 pricing agreement broke down last year. The U.S. is now imposing a 14.5 percent levy on softwood imports to offset cheap cutting rights in provincial forests. Angry Canada appealing tax.

Textiles and apparel: Protected by quotas since the 1930s. More than 40 countries, 69 percent of textile imports, 88 percent of apparel imports, covered by Multifiber Arrangement.

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