Over at National Review today, I correct recent claims from American Compass’ Wells King and Dan Vaughn that 1980s U.S. automotive protectionism—in the form of Japanese “voluntary export restraints”—was a tremendous success, boosting both Japanese investment in the United States and domestic “Big 3” car manufacturers at minimal cost to American consumers or the economy more broadly. As I explain, “a fuller accounting… reveals the VERs not to be some inspiring success but instead a cautionary tale of American industrial policy’s high costs and failed objectives.” Owing to word limits and format (as a letter in the “dead-tree” magazine), however, several aspects of my original critique—hyperlinks, charts, snarky asides, etc.—were left on the cutting room floor. This blog post will therefore serve as a supplement to the letter, which you can read in full over at NR.
Let’s start with the litany of rigorous economic studies showing that the consumer costs of the VERs were far greater than the $5 billion total King and Vaughn provided, due in large part to the fact that (contra their figures) the quotas increased the prices of not just Japanese cars, but also American and European ones too, and they lasted for another decade after President Reagan wisely disavowed them in early 1985:
As I note in my letter, this means that the automotive quotas cost, per Dinopoulos and Kreinin (1988), as much as $6 billion (around $16.5 billion in 2022 dollars) in 1984 alone—a burden that persisted for several more years and was, per the New York Fed study, disproportionately borne by Americans with lower incomes.
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