Comprehensively Cockeyed

GEORGE F. WILL

February 15, 1993|By GEORGE F. WILL

Washington. -- Occasionally there arises in Washington an idea so comprehensively cock-eyed it has a kind of beauty, the loveliness of a perfect illustration of the folly to which business and government are prone when they do not keep a proper distance from one another.

Consider the idea of reclassifying minivans and sport utility vehicles as trucks, thereby raising the tariff on imports of them from 2.5 percent to 25 percent.

Trucks carry cargo. Minivans are used by families with children, and by groups -- sports teams, children's and senior citizens' organizations, car-pooling commuters. A ten-fold tariff increase would be a tax on what Democrats refer to, reverently, as ''the forgotten middle class.'' (It is the class whose promised tax cut has been quickly forgotten by the Democrats).

Relieved of price competition by the 25 percent tariff, Detroit might do as it did in the early 1980s when the Reagan administration improvidently imposed ''voluntary'' quotas on Japanese automobile imports. Detroit raised prices enough to produce the phrase ''sticker shock.'' If, as one study of Detroit's past behavior suggests, Detroit would raise minivan prices 40 cents for every extra dollar of tariff, prices would rise more than $1,000.

Furthermore, 5,000 dealers with 200,000 employees sell the vehicles that a 25 percent tariff would drive from the American marketplace. These incensed dealers note that Chrysler, the leader in the minivan field, produces 54 percent of its Caravans and Voyagers in Canada (no tariff applies because of the U.S.-Canada Free Trade Agreement).

So under a 25 percent tariff on Japanese imports, American jobs in dealerships would be sacrificed to protect manufacturing jobs in Canada.

The torturous path to the present predicament began with President Johnson's December 1963 decision to impose a 25 percent tariff on brandy, potato starch, dextrine and light trucks in retaliation against European Community restrictions on U.S. poultry exports. (Chickens, trucks -- don't try to make sense of this, this is just modern government at work.) A Volkswagen truck was thereby kept from American consumers. Since then there has been much feverish lobbying and bureaucratic fidgeting about what is or is not a truck.

President Bush's Treasury Department imposed a regulation that baptized two-door (but not four-door) minivans as trucks. Then last year the United Auto Workers approached candidate Clinton about calling all minivans trucks. Mr. Clinton was then as receptive to the reclassification as he was grateful for UAW support.

Anyway, any Democratic administration will be congenitally disposed toward protectionism because the core values of contemporary liberalism are fairness and compassion. Democrats prefer ''fair'' trade to free trade.

Free trade, they think, is suspect because consumer sovereignty may not produce rational results unless guided by a political elite that has special understanding of rationality. Fair trade is ''managed'' by government that is wise and disinterested, at least when Democrats control it.

Compassion means the prevention or amelioration of pain. Change often is painful to some people, particularly those who do not anticipate it or would rather not adapt to it. Therefore protection (from change compelled by competition) is compassion.

But not even pain-prevention justifies protection of the Big Three. They have 91 percent of the already highly profitable (up to $8,000 a vehicle) minivan market and 82 percent of the market for sport utility vehicles (such as Chrysler's Jeep Cherokee, Ford's Explorer, Chevy's Blazer).

Last week the Big Three tiptoed to the edge of a precipice before pulling back from what would have been a suicidal jump. They almost filed a ''dumping'' complaint against Japan, charging Japanese firms with selling cars in America for less than they are charging in Japan. The complaint could have resulted in punitive tariffs on vehicle imports valued at $45 billion annually.

The Big Three were inhibited, in part, by fear of a consumer backlash. But the minivan reclassification can itself do enormous damage. By collaborating with protectionists in the political class, Detroit is risking a self-inflicted wound at a moment when Detroit's much-improved products -- the improvement owes much to foreign competition -- are reclaiming market share. Having reclaimed public esteem, Detroit may kick it away by urging government to impose, in effect, a substantial transportation tax on Americans.

Concerning the minivan reclassification, Robert Crandall of the Brookings Institution put the fundamental point plainly: ''There is no argument for a developed country to protect old-line producers of middle technology with a 25 percent tariff.'' Yet that tariff may be just a small part of a ravenous appetite for protection.

Because only prudential considerations, not free-trade principles, caused Detroit to abandon, for now, its ''dumping'' complaint, it is time for Americans to think hard about why, precisely, it is a problem if Japan, in its mercantilist foolishness, wants to subsidize Americans' transportation.

Meanwhile, one simple law would stop American protectionism.

It would stipulate that a CEO of a corporation benefiting from a tariff is, by virtue of his or her dependence on and involvement in government, a civil servant, and can be paid no more than a GS-15 ($86,589).

George F. Will is a syndicated columnist.

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