import tariff implications on Harley Davidson

Did US Safeguards Resuscitate Harley-Davidson in the 1980s?
Taiju Kitano

y

Hiroshi Ohashi

z

February 2009

Abstract

This paper examines US safeguards applied to the motorcycle market in the 1980s. After receiving temporary protection by means of a maximum tari¤ of over 45%, Harley-Davidson sales recovered dramatically. Simulations, based on structural demand and supply estimates, indicate that while safeguard tari¤s did bene…t Harley-Davidson, they only account for a fraction of its increased sales. This is primarily because consumers perceived that Harley-Davidson and
Japanese large motorcycles were poorly matched substitutes for each other. Our results provide little evidence that safeguard provisions triggered restructuring in Harley-Davidson.
Keywords: Safeguard; Tari¤; Random Coe¢ cient Discrete Choice Model; Motorcycles
JEL: F13; F14; L13; L68

1

Introduction

Ronald Reagan signed a recommendation from the US International Trade Commission (ITC) calling for …ve years of new tari¤s on heavyweight motorcycles in the period over the 1983–
1988 period. This tari¤ relief, called a safeguard or the escape clause, was intended to protect Harley-Davidson Motor Co. (hereafter,
“H-D” the last remaining US motorcycle manufacturer, against Japanese imports. At that time, H-D was
),
in …nancial distress, with merely four percent of the market it had dominated in the early 1970s. The new tari¤s were scheduled to start at 49.4% of the wholesale price and decrease to 14.4% in the …fth year, while
Japanese manufacturers were allowed to ship the …rst 6000 cycles per year under the old 4.4% tari¤, an allowance that rose by 1000 units a year. After receiving temporary import relief starting in 1983, H-D came back stronger than ever. Its sales increased dramatically at an annual rate of 10% from 1983 to 1990.
We thank Istvan Konya, Eiichi Tomiura, Ryuhei Wakasugi, Yasuyuki Yoshida, Kazuo Wada, two anonymous referees, and
participants

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