Ronald Reagan Was No Protectionist

He agreed to cap Japanese auto imports in 1981 but hated the deal and did it only as a compromise

By Phil Gramm. Excerpts:

"Mr. Cass’s argument, now a standard protectionist claim, was that because Reagan in 1981 agreed to a temporary voluntary restraint deal limiting the number of Japanese automobiles that could be imported into the U.S."

"the president hated the deal. He agreed to the compromise only to prevent lawmakers from passing more extreme protectionist legislation."

"Any hope of passing Reagan’s 1981 budget in the Democratic-controlled House would require a near-unanimous Republican vote, which at the time was incredibly rare."

"Reagan wisely defused the issue by asking the Japanese government to agree to a temporary voluntary cap on the number of Japanese automobiles that would be shipped to the U.S., and in return the automakers announced that they were satisfied with the solution."

"Reagan was the most committed free trader ever to serve as president. Even while protectionist demands grew louder, Reagan as a candidate proposed in November 1979 a free-trade agreement for North America."

"To Reagan, free trade was simply an economic extension of freedom. In his view, except in limited circumstances involving national security, government had no right to tell people that they had to buy a product so that someone else could benefit from producing it."

"Protectionists insist that America benefited from Reagan’s voluntary restraint agreement, but Reagan certainly didn’t believe that, quietly raising the auto import cap twice."

"in 1984 the cost of the trade restraint to U.S. consumers was $6 billion. Although some 45,000 automotive jobs were estimated to be saved by the voluntary restraint, those jobs came at a cost to U.S. consumers of $133,000 per job saved—more than five times the average income of an auto worker in 1984."

"Protectionists argue the restraint agreement brought foreign auto investment to America, but Volkswagen—which wasn’t under the auto agreement—built its first U.S. plant in Pennsylvania in 1978. Foreign investment in U.S. auto plants between 1981 and 1994, when the restraint agreement was in force, averaged only $671 million a year in 2017 dollars but averaged $6.6 billion between 1995 and 2008 after the voluntary restraint ended."