Question no.1: Explain how different theories presented presented in this case study supported and how they can be tested in general terms?
The different theories presented in the case study are in the context of the competition.The number of imports of Japanese cars had increased significantly during that time which was a great concern to the US companies as they were losing sales, some of them the m had be get sold off, sell subsidiaries or borrow money. 1st Theory:
The first theory presented in this context by the ITC was that the rise in imports was because of the fact that the Japanese cars were more fuel efficient, durable and preferred by the consumers. This was supported by survey of !,!!! US households. This survey was carried out by the "otor and #$uipment "anufacturers %ssociation. %ssociation. Supporters of this theory felt that imports should not be limited. 2nd Theory:
The second theory was price differentiation d ifferentiation created by labor cost differences was the cause. &ureau of 'abor Statistics estimated that average Japanese car wor(ers) wages and benefits in the first half of *+* were only half those of US car wor(ers. Those supporting this theory largely favored to impose taxing on the imports in order to raise their prices.
Question no: 2. Explain why the results results of the New or! or! Times poll reported reported abo"e are meaningless?
&ecause the main essence of case study was imposing import $uotas on Japanese cars whereas wh ereas there poll was about the comparison between perfect obs and cheaper foreign products which is totally irrelevant. -ew or( or( Times Times poll results showed that + per cent of %mericans felt that that it was more important to protect obs than to get cheaper cheape r foreign products. The second issue related to the past performance of US manufacturers, the possibility of achieving economies of scale and higher productivity with new plant.
The ITC has reected the idea of protection/ they blamed the managers of the US companies for their bad decisions. They claimed that these managers and firms should not be rewarded at the expense of the consumer and taxpayer, who would not only face higher prices and taxes, but also suffer from limited choice. Question no: #. Explain the conflict of interest between $% car manufacturers and the $&'?
The main conflict was that the U%0 was mostly concerned about maintaining the obs rather than protecting the profits of the manufacturers where US manufacturers were trying to produce cars globally by buying parts in many different countries wherever, they could be bought cheaper.They pushed foreign manufacturers to produce in the United States and to have +12 of their parts produced in the US.
Question no: (. why would the )apanese car manufacturers be willing to cooperate with limiting of their exports to the $nited %tates?
Japanese producers and politicians entered the agreement fearing that lac( of cooperation could result in even stricter limits. 0hen the agreement expired, Japan continued to limit exports, but by that time the maor manufacturers li(e 3onda, Toyota and -issan already had plants in the United States and sales from these soon outnumbered imports. Imports into the U.S. of foreign automobiles, mainly from Japan, have been restricted since %pril *4 by a so5called 6voluntary restraint agreement.6 The $uotas were imposed in response to pleas by the U.S. auto industry that it needed time to grow strong enough to compete with the imports on the free mar(et. The agreement was to limit car exports to the United States to .74 million units a year for three years. The limits on Japanese imports were in $uantity not in value, therefore Japan redesign their cars to modify and to produce new car in new technology. Question no: *. Explain how the cost and benefits of the import +uotes can be estimated in monetary terms describing any problems in"ol"es?
U.S consumers switched bac( to consuming more expensive and profitable cars, but this was partly and effect of the import restrictions, which gave U.S consumers little choice except to buy more expensive cars. The limit on Japanese imports were in $uality not in value therefore Japanese firms redesign their cars to ma(e them more luxurious and expensive, but the average Japanese import increase by 897!! in the same period the price of US made cars increased by :!2.
The problem may be, if we didn;t protect some of our firms, other countries could dump thousands of products on our country at extremely low prices and potentially hurt many of our domestic businesses. Question no: ,.-ne study estimated the cost of the +uotas at 1,/0/// per ob sa"ed. n "iew of this0 why do you thin! the +uotas were implemented? 3ocal Employment:
&ecause foreign imports are produced in other countries by foreign wor(ers, decreasing imports and increasing domestic production also increases domestic employment. Import $uotas imposed on Japanese automobiles in the *4!)s saved :79!! US production obs but at a cost of 87!,!!! per ob per year. This cost was a result of the addition of 8:!! to the prices of US cars, and 8!!! to the prices of Japanese imports. This windfall for
0hen a company is on the way of growing strong to compete with other foreign companies, $uotas help safeguards it from stiff competition. %s a result, this creates more ob opportunities local wor(ers. ncrease local in"estment:
0hile they are considered less economically than tariffs, $uotas play an essential role in trade as they put a limit on goods that are imported in a country, creating shortages that cause price fluctuations. %lthough $uotas wor( in a similar manner as tariffs, the additional cash often benefits foreign producers and not the local government. 5. Explain the differences between the decision ma!ing processes of the $.% car manufacturers and $.% go"ernment.
%t that time U.S economy was in recession, so to control the demand government increases the taxes.The US government was mainly concerned about maintaining the obs rather than protecting the profits of manufacturer. There are pressures for businesses to reduce costs, which can lead to increased unemployment as companies lay off wor(ers. 0hereas when import $uota was put on the U.S citi>en was restricted to buy 'ocal Cars which was a great benefit for the government as well as U.S manufacturers.. US manufacturer was ust concerned about their profit they are not bothering about the employment of the people.So basically these are the maor difference in US manufacturer and US govt. decision ma(ing process.
