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BPEA Article

The Effects of U.S. Trade Protection for Autos and Steel

Abstract

THE ROUGHLY 60 percent appreciation in the real value of the U. S. dollar between 1979 and 1985 created an environment that was increasingly conducive to protectionist politics in the United States. Automobile and steel quotas were imposed. A textile quota bill was passed in the House of Representatives. Motorcycles were subjected to quotas and tariffs. And pressures mounted for protection of the semiconductor and telecommunications equipment markets. The 1981 voluntary export restraint agreement with Japan on automobiles marked the first overt attempt to protect the U.S. automobile industry from imports since World War II. The 1984 steel voluntary restraint agreements, on the other hand, represent the third episode in protection for the U.S. steel industry in two decades. The first steel restraints began in 1969 and lasted until 1974. Trigger prices were imposed in 1978 and extended, erratically, into 1982. The current steel restraints have been implemented with twenty-five major steel exporting countries. Each of these exercises in trade restraint has been advanced as "temporary," designed to provide the U.S. producers with breathing room to adjust to the changes in world market conditions. But have they been successful in achieving this goal? This report seeks to provide at least a partial answer to that question, beginning with an examination of the effectiveness of the restraints in increasing domestic prices and output.

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