BUSINESS/ECONOMY

The fight over import quotas

James Fleming May 28 1984
BUSINESS/ECONOMY

The fight over import quotas

James Fleming May 28 1984

The fight over import quotas

BUSINESS/ECONOMY

James Fleming

Canada’s Japanese-car dealers were outraged. Consumers stood to suffer higher prices. But major domestic automakers and union spokesmen were unsympathetic. The reason: a survey released by the Automobile Importers of Canada last week revealed that, because of import quotas on Japanese cars, sales of those vehicles were 33 per cent lower in April, 1984, then in April, 1983. Even though a spring sales boom boosted sales of Canadian-made cars by nine per cent during April, the market share of Japanese autos fell to less than 12 per cent, the lowest level since December, 1979. Declared Robert Attrell, president of the Canadian Association of Japanese Automobile Dealers: “It’s horrendous, a travesty of justice.”

The sales figures starkly illustrated the impact of import quotas on the 937 dealerships belonging to Attrell’s association and the 8,500 people they employ across Canada. The figures added urgency to their ongoing campaign to eliminate import quotas under which only 153,000 Japanese cars entered Canada in the 12 months that ended March 31. But that effort faces little prospect of immediate success. Domestic automakers, parts manufacturers and auto union spokesmen, representing 125,000 industry employees, argue strenuously for an extension of the quotas to give the industry time to upgrade its productivity and profits. Still, that will mean continued hardship for Japanese-car dealers and for consumers who must pay higher prices for all cars because of protectionist measures.

In Tokyo last week federal trade officials attempted to negotiate a one-year extension of the quota system. According to International Trade Minister Gerald Regan, Canada wants the 153,000 quota continued until 1985. On the other hand, Japanese officials have said they favor a 25-per-cent increase in that quota, which would bring it to 191,000 cars. Already, Tokyo has agreed with Washington that its car exports to the United States will increase by 10 per cent to 1.85 million vehicles during the year that began in April. As for Canada, an external affairs official said only that a pact had not been reached.

The negotiations have been complicated by Canada’s insistence that in return for a relaxation of the quotas Japanese companies must increase their direct investment in Canada. In fact, that pressure has had limited success. Last week Honda Motor Co. officials in Tokyo confirmed reports that the firm intends to build a $100-million

assembly plant in Canada—probably in Ontario.

By attempting to extend the import quotas into their fourth year, Ottawa has come down on the side of the domestic industry. The reason, according to a federal official, is straightforward—the fear that Japan could flood the Canadian market with cars it cannot sell to other countries with import barriers in place. Essentially, Ottawa believes that the domestic auto industry and the sectors that rely on it, from steel to glass, play such an important role in Canada’s economy that their needs must take precedence over the

complaints of those who will suffer from import quotas.

The benefits of quotas to the North American industry are indisputable. The Big Three automakers in both Canada and the United States recorded record profits last year. In the United States, profits totalled $6.5 billion (U.S.). In Canada, Ford announced a $153-million profit, after a $108-million loss in 1982; General Motors had a record profit of $676 million, up from a loss of $71 million in 1982—putting it ahead of Canadian Pacific Ltd. as Canada’s largest company in terms of sales—and Chrysler achieved a profit of $119 million, compared to $17 million in 1982. According to Arvid Jouppi, a Detroitbased industry analyst, import quotas added one per cent to the industry’s net profits last year. But he argued that the consumer suffered because the lessened competition from Japanese vehicles al-

lowed North American dealers to add about $200 to the average cost of all cars sold. Said Jouppi: “The consumer has lost on this round of purchasing.”

For their part, industry spokesmen argued that import quotas are necessary in the short term to counter the advantages that Japanese producers enjoy, such as lower wages and more efficient production methods. (Experts estimate that Japanese cars cost about $1,500 less to produce than North American vehicles.) Ford Canada spokesman Hubert Serré also pointed out that “over the past five years, although Ford suffered a total of $556 million in losses in Canada, it invested more than $1.2 billion in Canadian operations, while the Japanese invested

practically nothing.” In the long term the domestic industry favors legislation requiring 60-per-cent Canadian content in Japanese imports.

But for Japanese-car dealers import quotas are an evil that must be eliminated immediately, for the sake of Japanese-auto dealers—and for the sake of consumers. To convince Canadians that import quotas are ill-advised Attrell’s organization has mounted an intense media advertising campaign. The efforts may be having an effect. In a survey to be released this week by the Laurier Institute for Business and Economic Studies in Waterloo, Ont., researchers found that only 52 per cent of Canadians surveyed favored quotas while 48 per cent opposed them. That was not an overwhelming endorsement. Said Attrell: “It’s costing Canadians dearly to coddle the auto unions and the Big Three automakers.”