A Shot Across Japan’s Bow : If Tokyo Doesn’t Heed the Message, Tougher Steps Are Certain
A ranking Japanese trade official warned the other day that anti-American sentiments will rise in Japan if President Reagan goes through with his decision to slap $300 million in retaliatory tariffs on Japanese electronic goods.
Indeed, recent polls indicate that resentment and bruised feelings already are on the increase, and there was muffled talk of retaliation even as a Japanese delegation headed for Washington to try to head off the sanctions.
It would be unfortunate if rising resentment, while understandable from a Japanese perspective, hardened into a spree of counterproductive America-bashing.
The new tariffs on Japanese electronic goods, scheduled to take effect April 17 in retaliation for Tokyo’s perceived failure to enforce a semiconductor trade accord, are largely symbolic. Only a small fraction of Japanese exports will be affected.
However, the move evidently came as a shock to the Japanese. It shouldn’t have.
Imposition of the tariff was not a protectionist move, in any sensible meaning of that word. It was a shot across Japan’s bow, fired regretfully but deliberately by an Administration that is ideologically committed to free trade.
The idea was to jolt Tokyo into taking seriously the U.S. exasperation over Japan’s predatory export practices and its foot-dragging resistance to demands for fair access to the Japanese market.
However, most Japanese see themselves as the aggrieved party. Yes, the United States suffered a $59-billion deficit in its trade with Japan last year, and things are not expected to be much better in 1987. But they accuse Americans of trying to make Japan a scapegoat for their own shortcomings, which have produced large trade deficits not just with Japan but with Europe and the Third World as well.
They have a point. U.S. economists generally agree with the Japanese that America’s trade deficit, which acts as a drag on the entire economy, is deeply rooted in the disparity between high consumer spending and low national savings and a sagging competitive spirit.
But none of this explains why Japan is also running a robust trade surplus with West European countries whose saving and spending habits bear little resemblance to the spendthrift American pattern. Nor does it explain away the trade distortions produced by the Japanese economy’s excessive reliance on exports, and the problems so frequently encountered by European and Asian producers, as well as by Americans, when they try to penetrate the Japanese market with goods that are clearly competitive in price and quality.
For example:
--The Japanese market is virtually closed to California rice, although it is of good quality and available at a tenth of what the Japanese pay for home-grown rice. Japan’s only real excuse is that rice cultivation is at the heart of Japanese culture--and, besides, farmers are a vital part of the ruling Liberal Democratic Party’s power base. That’s not a very impressive argument to American auto workers who saw their jobs eliminated by Japan’s single-minded assault on the U.S. auto market.
--Japanese construction companies have established a major foothold in the United States, where they won $1.8 billion in contracts in 1985 and $3 billion in 1986. In Southern California alone, they are engaged in a $200-million uplift of “Little Tokyo,” they are helping to plan and build a $550-million world trade center and are competing for a share of the Los Angeles Metro Rail system. Yet American firms are not allowed a comparable shot at construction projects in Japan--the present case in point being the big $8-billion airport project at Osaka, where U.S. companies are being foreclosed from the juicier portions of the job.
--The United States dominates the world market for supercomputers. Yet Minneapolis-based Cray Research Inc., the world leader in the field, has scored only eight sales in Japan. And not one of the 20 or so supercomputers installed or on order in Japan’s public sector is American-made.
--Japan has promised foreign access to the country’s large telecommunications market. But Motorola, which wants to sell cellular telephones in Japan, finds itself stymied by an “old-boy” network that effectively limits the opportunities for foreign-market penetration. The Japanese are employing similar techniques to limit British and American participation in a proposed international telecommunications venture. The result has been a harsh threat of retaliation from London.
Many Japanese recognize the need for change but argue that Japan is already moving toward less dependence on exports and toward a wider door to imports. And they say that Japan is hurting as a result of yen revaluation versus the dollar.
Indeed, economic growth has slowed, bankruptcies are on the rise and employment has climbed to 3% as some companies cut loose from the traditional guarantee of lifelong employment.
The volume of Japanese exports shows signs of turning down. Higher prices are beginning to affect Japanese auto sales in America. Japanese companies are transferring more production abroad; Honda is even talking about importing cars from its U.S. plant. But it remains to be seen whether economic reality will really be allowed to take its course.
The Japanese, stung by the Reagan Administration’s announcement of retaliatory tariffs, are reported ready to make concessions in several of the areas of most acute concern to trade officials in Washington in order to smooth things over.
The real need, however, is not for piecemeal adjustments but for a change in the web of informal but almost impregnable personal relationships that are the real barrier to reciprocal trade with Japan. That and a less obsessive pursuit of exports.
This may be asking the impossible. But if that is the case, America and other trading partners will have no choice but to organize mechanisms of their own to limit Japanese participation in their home markets.
