European Use of Import Restrictions To Protect Domestic Auto Industries

GAO reported on the experiences of four European Economic Community (EEC) countries which were using voluntary export restraints and similar arrangements to restrict auto imports. In addition, GAO discussed Spain's use of domestic content requirements and other measures to foster the development of its auto industry.

France, Germany, Italy, and the United Kingdom have imposed relatively limited restrictions on car imports in general but have strictly limited car imports from Japan. These governments all adhere to a communitywide tariff on auto imports from outside the EEC and impose safety and other technical requirements on imported cars. In addition, they use voluntary export restraints and similar arrangements to limit Japanese penetration of their markets. Despite these restrictions, the auto industries of three of the countries have experienced decreased sales. German auto makers' share of the domestic market remained relatively stable, and they were able to increase exports. In the early 1980's, auto makers in all four countries invested heavily to improve technology and develop better products. However, slow economic recovery in Europe may jeopardize auto sales. Since the 1950's, Spain has been developing a domestic automobile industry which has been attractive to foreign investment. Since 1966, it has imposed a ban on all imports of Japanese autos and permits imports of foreign-made auto parts only when such imports will not injure domestic manufacturers. Spain has been attracting foreign investment by tax credits, accelerated depreciation, grants, a relatively stable labor market, low wages, and a good geographic location. However, Spain intends to liberalize its domestic content limitations to increase its market competitiveness and enable it to join the EEC.