But Japan Should Not Be Scapegoat for U.S. Failures

Waving the magic wand of protectionist legislation over Japan won’t make America’s foreign-trade deficit disappear, because the Japanese didn’t cause it in the first place. Japan must open its own market, however, to avoid being made the scapegoat for U.S. economic failures.

No one denies that Washington’s enormous deficit of $140.57 billion in 1986 must be reduced. The question is how. The simplistic solution is to protect domestic industries by shutting out imports.

But protectionism endangers the postwar free-trade system that, for all its imperfections, has brought most of the world unprecedented economic growth and prosperity. Also, many debtor nations depend on earnings from exports to the United States to pay the interest on their loans. The tough trade bill that America is preparing to implement would hurt their economies and cripple debt-servicing plans.

In any case, Washington can’t bring its international balance of payments into the black through protectionism. The real causes of the trade imbalance are the diminished competitiveness of American industry and the huge federal budget deficit. Until those problems are addressed, U.S. trade figures will stay in the red.

Until about 18 months ago the United States could blame some of its difficulties on the inflated value of the dollar. Protectionist pressure waned somewhat when the yen began to appreciate against U.S. currency in October, 1985. Then Congress got angry again when the balance of payments failed to improve despite the yen’s rise of more than 40%.

The lag is due partly to the time that it takes for trade figures to reflect the full effect of currency realignments. Actually, U.S. exports did rise late last year, and Japan’s fell. But the improvement was too small to make a dent in the U.S. trade deficit. Tinkering with exchange rates won’t solve a $140-billion shortfall.

It is futile for Washington to blame Japan for the bilateral imbalance while turning a blind eye to its own fiscal follies and lagging industries. Even if Japan abolished all of its import quotas and removed every non-tariff barrier, it would have only a minor effect on its $58-billion surplus with the United States and the overall U.S. balance of payments. Tokyo trade negotiators have made this point repeatedly to the American side. The onus rests on the United States.

The fierce independence of the legislative and executive arms of the U.S. government complicates the task. Everyone agrees that the budget deficit should be reduced, but Congress and the President differ on where to cut spending. Pressure from constituents makes it hard for legislators to slash popular programs. The result is that the red ink flows on and on, like the Mississippi River.

Nevertheless, the only way to improve the U.S. trade performance in the long run is to reduce the fiscal deficit. But belaboring the obvious won’t do any good. Japan can only get the point across by action.

Japan’s objective is twofold: to not be a scapegoat, and to get Americans to acknowledge their own responsibility for the trade imbalance.

We must boldly remove all barriers to market access while stimulating domestic demand to reduce our traditional reliance on export-led growth. Americans should be given no pretext to blame us for their own problems. People admit their mistakes and begin to do something about them only when they run out of excuses. Meanwhile, we must resist unreasonable demands.

This won’t be easy, of course. We need a finely tuned mix of liberalization in Tokyo and straight talk to Washington. It’s the only way we can weather the protectionist storm blowing across the Pacific.