Two Economists Oppose Trade Retaliation Against Japan

Two former chief White House economists, warning that retaliation against Japan could set off a global trade war, said Sunday that the strong dollar is responsible for the massive U.S. trade deficit.

Both Alan Greenspan, who served under President Gerald R. Ford, and Charles L. Schultze, an adviser to President Jimmy Carter, said on ABC-TV’s “This Week With David Brinkley” that they oppose measures pending in Congress aimed at forcing Japan to open its markets to more U.S. products.

Schultze said advocates of retaliation are making Japan “the scapegoat” for the inability of the United States to cut its budget deficit, which he said strengthens the dollar and makes imports cheaper for American consumers.

‘Fighting the Wrong War’

Greenspan said he believes that Congress and the Reagan Administration, which has been negotiating for trade concessions from Japan, “may be fighting the wrong war at the wrong time” because he expects the dollar to weaken late this year or next.

Appearing on the same program, Peter Sato, economic affairs minister at the Japanese Embassy, said his government is prepared to “go along” with some U.S. demands for lower tariffs on such items as plywood and to open Japan’s markets to more U.S. telecommunications equipment.

Two members of the Senate Finance Committee, Chairman Bob Packwood (R-Ore.) and Daniel Patrick Moynihan (D-N.Y.), disagreed over trade policy.

Moynihan said the strong dollar is the problem, but Packwood said it “is not the principal reason for our trade deficit.”