I I OPINION ThMcignDal i Page 4 Thursday, December 4, 1980 The Michigan Daily I _a _ T _1 1 Edited and managed by students at The University of Michigan Feiffer . 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- ~tually. 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 I 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 questions. 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 relax. Right? IN ,OV)6 A( AMERICA Han MoRALITr' r 1 A~3PL Twf Ac)P-rf th, 1 LTC ?T 1[KIL-LAPP RoWpy A c3 FRIuC OA. OIiruu.THEY 0 w6 5wr OUR FOI~R ~ tot- 7C> J 6 awRs, Vznxr- ve as a* fR16,13M OF~ i A 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- ative. - - - 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 competition.- 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- ferings. 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." THIS POINT IS CRUCIAL. The observed 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- gallon. 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 capital. THESE THREE FACTORS-recession, 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 manufacturers? 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 month. 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 .n'vi-o E . _ _ _ .. r - ,,,.. ,,, ., __ _. 4 :sue Ocr Vic Ir. A