Here’s a scenario you didn’t see: The North American International Auto Show got underway last week and not a single Japanese car was allowed. Such a slight would be unthinkable, but it’s not far from what Japan did recently when it chose to exclude U.S. autos from its “Cash for Clunkers” trade-in program.
The gall is astounding. In 2009, when the U.S. began to formulate a “Cash for Clunkers” program, Congresswoman Betty Sutton (D-Ohio) had proposed that any such legislation extend only to cars produced in North America. Overseas automakers quickly responded in an uproar, and the $3 billion U.S. program was instead made open to all fuel-efficient cars, no matter their country of origin.
In amazing contrast though, the Japanese government recently adopted its own Cash for Clunkers program and not a single car from the Detroit Three was made eligible. Rep. Sutton is outraged and has been joined by Michigan Sens. Debbie Stabenow and Carl Levin, as well as Reps. Sander Levin and John Dingell, in protesting this stunning lack of reciprocity.
The American Cash for Clunkers program altruistically included foreign automobiles at a time when the U.S. automotive industry is in dire straits. The U.S. International Trade Commission (ITC) reports that the U.S. ran a $41 billion automotive deficit with Japan in 2008. And U.S. auto workers have seen their jobs disappearing wholesale, with motor vehicle and parts manufacturing losing 152,000 jobs between October 2008 and October 2009, according to the Bureau of Labor Statistics (BLS).
As Congresswoman Sutton has pointed out, the Japanese clunkers program, which may soon be extended, deliberately excluded U.S. automobiles. The slight is so egregious that even the U.S. Chamber of Commerce has issued a letter expressing concern.
The bottom line is reciprocity. The United States remains the most open market in the world, as evidenced quite unfortunately by our roughly $700 billion annual trade deficit. But the U.S. continues to play by the rules of world trade, and simply put, “rules are rules, not suggestions.”
The Obama Administration has demonstrated a good record on trade enforcement so far, including strong action on a flood of subsidized Chinese tires. When facing the brazen protectionism of Japan’s closed “clunkers” program, however, it should take steps at the World Trade Organization or domestically to ensure reciprocity. And this should apply to not only cash for clunkers but also autos in general.
The U.S. often gets accused of protectionism. The truth is, we enforce our rules. Others break them. If there are no consequences, there will never be balanced trade.
