Tuesday, May 05, 2009

This would be a first

President O said last week that he doesn't intend to be real hands on with or micromanage his new public investment vehicles, Chrysler and GM. He also said:

"I'm not an auto engineer, I don't know how to create [an] affordable, well-designed plug-in hybrid. But I know that if the Japanese can design [an] affordable, well-designed hybrid, then doggone it, the American people should be able to do the same. So my job is to ask the auto industry: Why is it you guys can't do this?"

Hmmm, I guess President O is not a business historian either or he would know that one big reason the US headquartered automakers have been "unable" to make world class small cars is that the Federal government has long given them a large subsidy to make big ones!

Here is Robert Lawrence (via Dani Rodrik, who is on a roll!):

the US protects its domestic market with a twenty-five percent tariff. By contrast, the import tariff on regular automobiles is just 2.5 percent and US duties from tariffs on all imported goods are just one percent of the overall value of merchandise imports. Since many of the inputs used to assemble trucks are not subject to tariffs anywhere near 25 percent -- US tariffs on all goods average only 3.5 percent -- the effective protection and subsidy equivalent of this policy has been huge.

Since when you ask? How about 1962! I have to admit that I didn't know how long this had been in place. I assumed it came about in the 1970s.

PS: for a simple explanation of effective protection, look here.


Anonymous said...

But if the Japanese have developed an affordable, well-designed, plug-in hybrid, shouldn't we just buy it rather than try to reinvent one that is just as good?

br said...

Treasonous Anon,
Patriotism dictates that the US must have an absolute advantage in the production of all goods and services worth consuming. [sarcasm]

Shawn said...

we're still not banana independent. for shame.

Anonymous said...

I have problem with this. When Toyota's first Prius came out it's big advantage over GM's Metro, a three cylinder traditional car, was that it was much more expensive. The US and California governments rushed to Toyota's aid thru the hybrid tax credit and Cali's opening of HOV lanes to hybrids. Still, Prius did not sell well for years, until they became chic. From an economic perspective hybrids still don't make much sense for the majority of people. Back i the '90's GM was certainly correct that they didn't make sense.

Anonymous said...

Anon is correct GM did the economically sensible thing. Also remember GM and Ford build very good compact and sub compact cars in Europe where they sell. GM and Ford outsell Honda and Toyota by at least 2 fold in an unsubsidised market.