U.S. Trade Gap Raises Fears in Asia
East Asia’s trade with the United States quadrupled in the past decade, bringing new prosperity to millions of Asians. But Asians are selling more to Americans than they buy from them, and that has raised widespread fears in the region that the United States will take steps to cut back.
Japanese cars, Korean steel, Taiwanese electronics, Indonesian lumber, Malaysian palm oil and textiles from Thailand and China all helped to push total East Asian trade with the United States to $169 billion last year. That U.S. Commerce Department figure, which includes Australia and Oceania, is a sharp contrast to $42 billion in 1974 and $132 billion in trade last year with Western Europe, once the United States’ most-favored partner in commerce.
The Asian goods selling in U.S. markets, however, have given a sharp tilt in the Asians’ favor in the U.S. trade balance in the area. East Asia last year sold $63 billion more in the United States than U.S. merchants sold in Asia, accounting for more than half of America’s record high trade deficit of $123 billion.
That imbalance has brought concern among Asians that the U.S. Congress will throw up barriers. Prime Minister Mahathir Mohamad of Malaysia, for example, said in a recent speech in Hong Kong that all of Asia could be affected by U.S. trade retaliation against Japan.
Threat of ‘Economic Cold War’
“Rather than be over-exercised by the Soviet threat,” he said, “I would argue that a much greater threat to the entire Asia-Pacific region is the emerging economic cold war between the United States and Japan.”
Japan, with massive shipments of autos and electronic goods and a bilateral trade surplus of $36.9 billion in 1984, has borne the brunt of U.S. complaints about unfair trade practices. But, in fact, the newly industrialized countries of South Korea, Taiwan, Singapore and Hong Kong--the NICs, in the jargon of international economists--are outdoing the Japanese in expanding U.S. markets. Five of the 10 nations with the worst trade imbalances with the United States last year were Asian--Japan, Taiwan, Hong Kong, Indonesia and South Korea.
Asian exports to the United States took off in 1984 as a result of the robust U.S. economy and the strong dollar, which made foreign goods relatively cheap.
Toys, garments, electrical products and other goods shipped from Hong Kong last year were worth $8.9 billion, up from $6.4 billion in 1983. Korean exports, from shoes to electronics, climbed 41% to $10 billion. Malaysian shipments were up 33% to $2.8 billion, while Singapore’s exports jumped 58% to $4.1 billion. Trade with China, a latecomer to the Asian economic scene, shot up to $6.4 billion from $4.4 billion, with sales of Chinese textiles and oil products slightly topping purchases of U.S. wheat, lumber and fertilizers.
The economies of the four NICs, which have grown at a pace of nearly 10% during the past decade of international recession, have benefited the most from American markets. Total trade with the NICs jumped to $56.9 billion in 1983 from $8.7 billion 10 years earlier, with more than 90% of NIC exports being manufactured goods and high-tech products.
Cheap Labor, Advancing Technology
Asia’s cheap labor means that Asian goods are cheaper for Americans, but Asian technology also is advancing at a rapid rate. At the same time, Asians are trading more among themselves, another factor in reducing U.S. exports to the area. Japan, for example, now out-trades the United States in several Asian countries. But Asian dependency on American markets remains very high.
Protectionism has already shackled sales in the United States of Korean shoes and steel, Japanese cars, Indonesian plywood and textiles from wide areas of Southeast Asia. China two years ago showed displeasure over textile quotas by cutting off new purchases of U.S. cotton and soybeans.
Textiles especially threaten good trade relations. Donald Tsang, Hong Kong’s deputy director of trade for U.S. affairs, called a bill currently before Congress that would reduce textile and apparel imports to 1983 levels the “worst piece of legislation we’ve ever seen.”
Officials also say “country of origin” import restrictions banning garments made partly in third countries and finished in Hong Kong to avoid U.S. import quotas would cut textile exports by $280 million annually and threaten the jobs of 50,000 people.
Asians also maintain that the United States, with its cultural roots in Europe, has given short shrift to the economic vitality of Asia. At the end of 1983, less than 10% of the $226 billion in total U.S. direct investment overseas was in East Asia.
Nevertheless, greater U.S. business initiative is visible. There are now 124 U.S. companies with offices in China, for instance, and U.S. investment in Singapore reached $5.28 billion last year, up 25%.
