Trade Friction Threatens Vital U.S.-Japan Ties : American Patience Wears Thin Over Tokyo's Stonewalling on Differences

The Economist of London recently commented that the United States and Japan are, in the words of a Japanese proverb, "in the same bed but with different dreams." Unfortunately, those dreams are in danger of turning into nightmares.

The U.S.-Japanese relationship is one of the most important in the world. We have the two strongest economies on the globe, and these economies are inescapably interdependent. The American military shield is vital to Japanese security, and Japan is one of this country's most important and valued allies.

Both nations recognize the importance of maintaining close and friendly relations. But, because of the huge trade imbalance between the two countries and what Americans perceive as Japanese stonewalling on corrective measures, the relationship is under real and growing stress.

Just the other day U.S. Trade Representative William E. Brock III, a free-trader at heart, said that the Reagan Administration is exploring ways of retaliating against Japan for its one-sided trade policies.

Such tough talk can be explained away as hard-nosed negotiating aimed at producing Japanese concessions in trade talks that are now under way. But more than rhetoric is involved.

A proposal to impose a "temporary" 20% surcharge on imports of manufactured goods is picking up surprising support on Capitol Hill--partly because the "temporary" measure would generate an estimated $180 billion in deficit-reducing revenues over three years, but mostly because of pique with the Japanese.

The Administration opposes the surcharge--and rightly so, since it would cause great friction with Japan and other trading partners and generate retaliatory measures against U.S. exports. But, as Brock put it, "People don't think we're getting a fair shake abroad. They're coming to the conclusion that it's going to take a two-by-four to get other countries' attention."

The complaints, moreover, are coming not just from old rust-belt industries such as autos and steel, but also from high-technology companies.

In 1984 this country's imports exceeded its exports by $126 billion, of which the trade deficit with Japan accounted for almost $37 billion. Never mind the one-sided flow of autos: Trade in electronic products alone was $15 billion in Japan's favor last year. The gap will be even wider in 1985.

The Japanese argue, with some justification, that they shouldn't be blamed for a problem that has its roots in the strong U.S. dollar and the relatively poor performance of U.S. exporters. There is no question that the superdollar, by making foreign goods cheaper in the American market and U.S.-made goods more expensive in other countries, is the biggest single reason for the huge trade gap. And it will be very difficult to cure the strong dollar until the Reagan Administration gets serious about reducing the huge federal budget deficit.

The fact remains, though, that if the dollar magically fell to a more favorable exchange rate with the yen tomorrow, this country would still have a legitimate beef against Japan's reluctance to allow U.S. manufacturers the same shot at the Japanese market that Japanese exporters enjoy here.

The United States is far from a simon-pure free-trade zone; the Japanese have been called on to accept "voluntary" restraints on a variety of items. On balance, however, American trade policy has accepted the fact that the Japanese are more efficient producers of a lot of things--automobiles, cameras, TV sets and video recorders, among them--and that the U.S. consumer should be allowed to benefit accordingly.

Even under the quotas on auto imports that President Reagan is allowing to expire March 31, the Japanese have been shipping almost 1.9 million cars a year to the United States. Honda, Toyota and Nissan all sell well over 20% of their total production in the United States. With the quotas off, additional shipments of at least 10% are anticipated.

Theoretically the thousands of U.S. jobs that are lost in the auto and other affected industries should be offset by jobs created in industries where U.S. manufacturers are still very competitive both at home and abroad. So far, however, it isn't working that way.

Part of the problem is structural. The Japanese economy is dramatically dependent on the growth of exports; the pressure to export could be constrained if the government encouraged the growth of domestic demand through higher wages, more public works, etc. But that hasn't happened.

Also, pressure on the United States to accept growing imports of manufactured goods from South Korea, Taiwan and other developing nations is directly related to the reluctance of Japan to make room in its own market. The tendency is for America to become everybody's dumping ground. (The United States imports several times as much from Third World nations as does Japan.)

As for U.S. access to the Japanese market, the big problem isn't formal tariffs and quotas, but the deeply ingrained Japanese habit of using quality inspections, certification procedures and other bureaucratic gimmicks to make things harder for would-be foreign suppliers--be they American, European or Hottentots.

Japanese Prime Minister Yasuhiro Nakasone seems sincerely dedicated to giving U.S. companies a better shot at the Japanese market. But it is far from clear that he has the power to put things right.

Two weeks ago Foreign Minister Shintaro Abe told American officials that it would be "extremely difficult" to open the Japanese market to U.S. lumber exports. And despite the unquestioned American capabilities in telecommunications, the Japanese have an 8-to-1 trade advantage in this area, and U.S. negotiators are beginning to despair that the Japanese have any intention of giving U.S. manufacturers a fair chance to change the balance.

One U.S. trade official, intimately involved in negotiations, has come to the reluctant conclusion that, in the long run, pressuring the Japanese to open their markets simply won't work because in effect "we are asking them to change their culture. I suspect that we are just going to have to handle the problem ourselves--through various devices to make American exports more competitive in the world outside Japan and, where necessary, to regulate Japanese access to the U.S. market."

That isn't the way any red-blooded free trade-minded American would like to go. But there won't be any choice if the remark by a Japanese official to Business Week truly reflects political reality in Tokyo.

In his words, "I don't know what the prime minister promised. But prime ministers come and go. Whatever his desires, he must work through the appropriate ministries. This is our history of more than 100 years."

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