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December 04, 1980 - Image 4

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The Michigan Daily, 1980-12-04

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Page 4

Thursday, December 4, 1980

The Michigan Daily I

_a _

_1 1

Edited and managed by students at The University of Michigan



Vol. XCI, No. 75

420 Maynard St.
Ann Arbor, M1 48109

Editorials represent a majority opinion of the Daily's Editorial Board

Who? Huh?
ORE THAN two-thirds of them
said they favor censorship of
movies, television, books, and maga-
zines. Seventy-four percent would vote
to limit property taxes and the majority
would be willing to cut back welfare
payments and public transportation
funds. Eighty percent said they belong
to an active religion and 71 percent go
to church regularly. Ninety-four per-
cent say they have never used drugs;
including marijuana.
,.A recent poll of the membership of
*Moral Majority, perhaps? No - a
recent poll of 24,000 high school studen-
ts billed as tomorrow's leaders, ac-
Thesurvey was sent out by the
publishers of Who's Who Among
American High School Students to
gauge the opinions of this country's
future movers and shakers on a
variety of social and political issues.
The results'are moving and shaking,
to say the least. They would seem to
indicate that the nation's next
generation of leaders is even more
frighteningly reactionary than this
generation is turning out to be. (For
purposes of argument, Ronald Reagan
is assumed to be part of this generation
of leaders.)
Felonious as


Relax! Right?
Fortunately, the survey is hardly a
scientific sampling of the opinions of
top high school students. Only half of
the students who received the survey
responded to it, suggesting that only
those most vocal about their beliefs
took the trouble to answer the
Further,- Who's Who Among
American High School Students is har-
dly a definitive listing of the country's
best students. Teenagers are recom-
mended for inclusion in the book by
counselors and youth organizations,
and as far as the publishers are con-
cerned, the more students included,
the better - once students get their
short biographies into the book, they
have to purchase their own copies of it.
Who's Who has no relation to the-more
legitimate Who's Who in America
series of reference books.
So we really don't have to worry.
These 24,000 students are not
necessarily the harbingers of this
country's future. Their responses to
the questions probably bear no relation
to the real political beliefs of the
nation's youth. We can sit back and

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Import quotas:A protectionist

pill that could kill th

sault on rights

ARD-LINE law-and-order means n
boosters in the Michigan House of about thos
Representatives are plotting an amen- the crim
'dment to a state law which they hope prosecute
kwill seal off the possibility of merciful tent of th
Iulings in certain erimina lcases. changing
The United States- Supreme Court degree."
-ruled last month that "felony-murder" Court dec
laws are unconstitutional. A felony- Committe
murder law dictates that a criminal Hertel (
who kills someone while committing amendme
another serious crime is automatically 'homicid
guilty of first-degree murder. the origin
Michigan had such a law, and state law Tha is
enforcement agencies were furious That i o
over the high court's ruling, which they Supreme
claim will make convictions for mur- proposed
der more difficult to obtain. may unju
The court's ruling was perfectly sher pens
correct-first-degree murder, is far first-deg
more serious than any other crime, whether o
and for good reason. A first-degree Certain
murder is one that is both legislator
premeditated and intentional. Yet
Michigan's (and other states') felony- rights of
murder laws eliminated con- greater vi
siderations of volition, even if a death not violal
were totally accidental. zeal. The
But state reps who are gung-ho on quick sto
deterring crime through whatever tee's initi
F n
>~ "
--- ~

ecessary are not concerned
se old-fashioned definitions of
e. They want to be able to
any killer to the fullest ex-
e law, even if it does mean.
the legal definition of "first
So, to sidestep the Supreme
cision, the House Judiciary
ee, led by Chairman Dennis
D-Detroit) has passed an
ent that substitutes the word
e" for the word "murder" in
al law.
a cosmetic change at best,
es not solve the problem the
Court cited. Yet if the
law passes, more criminals
istly be subjected to the har-
alties typically levied under
ree murder convictions,
r not their acts deserve it.
ly it is reasonable for
s to be concerned about the
victims in violent crimes. But
vigilance in prosecution need
te the law through excessive
legislature ought to put a
p to the Judiciary Commit-
- - -

The current demands for protection of the
U.S. auto industry from foreign import com-
petition could result-in profound troubles for
U.S. consumers, the national economy, and,
ironically, the U.S. auto industry itself.
Based on an examination of the evidence, I
conclude that whatever injury the U.S. auto
industry has, or will, suffer has been essen-
tially self-inflicted by managerial
miscalculations of market demand. Fur-
thermore, the proposed quotas offer no
assurance that the domestic industry would
be restored to health or that large numbers of
workers would be recalled. On the contrary,
the proposed quotas could seriously damage
(he public interest by removing the one effec-
tive stimulus toward domesically produced
fuel-efficient autos: import competition.
AT LEAST SINCE World War II, the U.S.
automotive industry has demonstrated a
record of innovative lethargy and non-
progressive sluggishness on the technological
front. It has chosen to react to change rather
than to initiate it-to adapt reluctantly to ex-
ternal pressures like government safety
regulations, oil price increases, and foreign
Notably, Detroit introduced the compact
car in response to the imports of the late 50s;
it introduced the sub-compact only after the
import of foreign sub-compacts in the late 60s.
Today, still reacting to external pressure, it
proposes eliminating the pressure altogether
through government protectionism.
Of course, there is no question that the in-
dustry is suffering a profound malaise.
U.S. auto production, sales, and employment
have experienced a significant decline, while
import penetration has significantly in-
creased. But the import increase does not ex-
plain the domestic manufacturers' decrease.
Rather, the weakness of the domestic in-
dustry is explained by a combination of three
primary factors.
THE 1979-80 RECESSION, like all
recessions, has had a disproportionately
severe impact on the automotive industry.
Total U.S. industrial production fell by 9.2
percent, while the production of motor
vehicles and parts decreased by 25.3 percent.
Significantly, earlier recessions since 1953,
when auto imports were negligible, had
similar effects on the auto industry.
In the current recession, the normally
severe cyclical impact on the auto industry
has been exacerbated by unprecedented in-
terest rates, escalating new car prices (and
falling used car prices), rising gasoline costs
and shortages, and unappealing'product of-
The persistent failure of the Big Three
companies to recognize that the era of the
gas-guzzler had given way to that of small,
fuel-efficient cars is among the most impor-
tant causes of the current sickness.
DESPITE THE 1973 oil embargo, U.S. car
makers chose to continue to rely on "inter-
mediate" and "standard" cars as their main-
stay. They presumably reasoned that they
could thus avoid competition in the small car
field, where foreign producers were strong,
and could capitalize on the higher profit
margins on "full-size" cars (in accordance
with Henry Ford II's maxim that "mini-cars
mean mini-profits"). Whatever their reasons,
the decision had seriously adverse con-
sequences for the U.S. manufacturers, and
ultimately for their employees.
The statistics tell the story. U.S. producers'
shipments of sub-compact and compact cars
not only held their own between 1975 and 1980,
but substantially increased their share of
consumption. The percentage of large cars, in
contrast, declined dramatically during the
same period-from 47.6 percent in 1975 to 29.2
percent in the first half of 1980.
As the U.S. International Trade Com-
miginn staff ntd "From .Tnuarv-.un

By Walter Adams
1979 to January-June 1980, large cars' share
of apparent consumption decreased by more
'than imports' share increased."
decline in domestic auto production and em-
ployment does not affect the industry as a
whole. It is confined to the larger vehicles.
The Commission's own statistics make it
clear that the managerial decision to continue
reliance on large cars, rather than on
development of smaller cars, is the principal
cause of the industry's current problems.
The industry's long battle against - the
government's fuel efficiency standards lends
perspective to this flawed decision. As late as
April, 1979, the U.S. auto industry was still
fighting the Transportation Department's
272/2 mile-per-gallon requirement for the 1986
fleet. A GM spokesman told a Senate sub-
committee that "the fuel economy standards
have greatest impact and are potentially the
most disruptive in the industry and
the nation." He went on to warn that meeting
the standards would be "very costly" and
that "there is no reasonable assurance that
consumers will be willing to buy te kinds of
cars and trucks we will be forced to offer."
He did not refer to the fact that foreign auto
producers were already meeting or exceeding
the standards, and doing so without apparent
difficulty. According to the EPA fuel efficien-
cy ratings released six months later, the top
ten cars were imports. In' the low-mileage
category were 22 Chrysler and GM models,
which tied for the near bottom at 14 miles-per-
THE THIRD CRITICAL factor in the
current malaise is the degree to which U.S.
auto manufacturers are themselves in-
creasingly relying on imports. Last year, U.S.
auto producers (excludingVW of America)
imported nearly 28 percent of all imported
cars and nearly 70 percent of all imported
light trucks.
The U.S. manufacturers' current international
investment policies, and plans for a "world
car"-an amalgam of components manufac-
tured in different countries around the
globe-are a further indication that their
reliance on overseas supply sources in the
near future is likely to increase, to the
detriment of auto production and em-
ployment in the United States.
Already, more than half of the auto and
light truck prodktion from seven U.S.-
operated auto plants in Canada is exported to
the United States. Ford and GM operate
manufacturing facilities in the United
Kingdom, Australia, West Germany, Mexico,
Brazil, and Colombia, not to mention the ex-
tensive cooperative arrangements with auto
producers in Japan. In its 1979 Annual Report,
GM announced plans for new plants in Spain
and Australia, and noted that "total invest-
ment in these and other European facilities
will exceed 12 billion, the largest overseas ex-
pansion ever undertaken by GM."
YET AT THE SAME time as they are
pouring billions of dollars into foreign
operations, the Big Three continue to com-
plain about rising import shares of the U.S.
market, and to demand mandatory import
quotas. And as new plants rise in Mexico,
Spain, Austria, and elsewhere, the U.S. plan-
ts, which are in dire need of modernization,
conversion, or rebuilding, are being closed.
Obviously, this pattern is not calculated to
hasten the re-employment of the roughly
300,000 UAW members now on layoff, nor is it
consistent with industry emphasis on the need
for capital in order to lift the U.S. auto in-
dustry out of its current doldrums.
In sum, if the domestic auto industry has
suffered injury from imports, a significant

se atient
cause lies in the extent to which the manufac-
turers themselves are importing their own
products from abroad while exporting their
reliance on large cars, and foreign invest-
ment practices-alone account for the lion's
share of the domestic auto industry crisis. If 6
we accept this, what then will be the impact of
the import quotas being proposed by the
First, consider what quotas will not
achieve. They will not induce a shift from
small imports to small U.S. cars, because the
U.S. industry is not able to satisfy the deman-
ds of a rapid shift. In the 18 months leading up
to June, 1980, U.S. manufacturers were able
to produce only about 7 million compacts and
sub-compacts, compared to the demand
for-and sale of-9.3 million such cars.
Nor will quotas induce large numbers of
people to buy larger cars. Consumers will
simply defer new car purchases and drive old
cars longer or buy used cars.
ALSO, THERE IS little reason to beliheve
that the higher profits that U.S. producers
would realize from import quotas would be
used to hasten the necessary conversion of
domestic plants from large car to small car
production. While the producers would be
given the financial ability to convert, com-
petitive pressure to undertake such a conver-
sion-now supplied by the imports-would be
missing. The quotas offer no assurance that
the higher profits will be invested in new
production facilities within the United States
rather than overseas.
What the quotas will do is even less en-
couraging. They will restrict the only
meaningful competition to which the
domestic industry has been subjectedhsince
World War II, probably resulting in higher
prices, poorer product quality, and less
product variety.
The anticipated higher prices will exacer-
bate the nation's- double-digit inflation.
Already, domestic producers are posting the
largest price boost for 1981 models on their
smaller cars, while reserving smaller price
increases for their larger ones.
And finally, the quotas would serve to un-
dermine the nation's efforts to conserve
energy and reduce reliance on imported oil by
artificially, curtailing the availability of
small, fuel-efficient cars.
In short, Detroit's "Better Idea" - the
restriction of foreign imports-is a potential
disaster. Until someone does come along with
some real ideas, the best policy is to face the
facts as best we can. The government should
concentrate on combatting the recession to
alleviate the disproportionate impact on
cyclical industries like automobiles. And it
should devise a careful program of loan
guarantees, direct loans, or low-interest
loans, specifically designed to finance the
construction of small car and light truck plan-
ts within the U.S. That must be the quid pro
quo: within the U.S.
Walter Adams is a former president
and current professor of economics at
Michigan State University. This article is
condensed from a statement he submitted
to the U. S. International Trade Com-
mission when it was considering imposing
import quotas on foreign automakers last
The ITC voted not to restrict foreign
car imports, but a bill that would em-
power the president to negotiate with
foreign countries for import quotas is
now pending in the Senate.
The article is from the Pacific News


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