Zen and the Art of Japan-U.S. Fighter Plane Building

Lacerating, shivery fear hasn’t motivated U.S. foreign policy since the days of Sputnik and the “missile gap” 30 years ago, when anxiety about Soviet military advances generated government mobilizations in education, space exploration and defense. For most of the years since, the United States has rarely worried that any nation could threaten its world role. It could afford to support an open trading system, spend billions defending “vital” interests peripheral to its security and sublimate international economic advantage to foreign-policy goals.

But a new era of anxiety has begun that threatens the adamantine consensus behind all those convictions. The new era’s difficult dimensions are suggested by the continuing dispute between the United States and Japan over the construction of an advanced fighter airplane. At the immediate level, opponents of the deal--under which the United States would help Japan build a modified version of the F-16 known as the FSX--fret that Japan will ultimately use the technology transferred through the project to threaten the U.S. aerospace industry, a leading exporter.

This concern in Congress and corners of the Bush Administration taps into a deepening American fear of being surpassed--not militarily but economically. The difference between today’s political environment and when the negotiations for the joint production began “is that back in the mid-1980s we weren’t scared about our economic future,” said William T. Archey, a former top Commerce Department official who is now international vice president at the U.S. Chamber of Commerce. “Underlying this dispute is the realization that the (belief) we are the single pre-eminent economic power in the world is an anachronism.”

That realization is being hastened by a growing understanding that the huge trade deficits the United States accumulated in the mid-1980s were no aberration. Last year the trade deficit declined substantially (from about $152 billion to $119 billion), easing concerns about America’s economic competitiveness during the presidential election.

This year may see some additional improvement. But the dramatic gains from the dollar’s devaluation have now been won; from here out, economists say, further improvements will come grudgingly. Commerce Secretary Robert A. Mosbacher quietly told a House subcommittee last month that the Bush Administration’s hope was merely to push down the trade deficit “to $100 billion or below” in the next few years. Without policy changes, even that modest goal may be unreachable. Last month, the Institute for International Economics projected that the trade deficit would begin to rise again after this year, settling in at the $120-billion range through the early 1990s.

Only a few years ago such numbers would have been inconceivable. Now, like the huge budget deficits, they are greeted in many parts of the Capitol with shrugs. Nothing has focused and solidified the fears of economic retreat. “There is a tendency to ease up on taking action as you observe some (problem) persist and there’s no catastrophe,” said William R. Cline, author of the institute’s study.

What is the price of living with unbroken $100-billion-plus annual external deficits? To Cline, the price is the risk of jarring economic contraction precipitated by a collapse of the dollar and the larger possibility of the Federal Reserve Board keeping interest rates abnormally high to attract the foreign capital that finances our debts. To Rep. Richard A. Gephardt (D-Mo.), who based his 1988 presidential bid on trade issues, the risk is “losing control of our economic destiny”--particularly as Japan and other trading partners recycle their surpluses into purchases of U.S. companies, banks and real estate. To George Bush the risk is, as in many things, not yet clear.

During the presidential campaign, Bush dismissed arguments from Gephardt and others that huge trade deficits marked the receding tide of U.S. hegemony. “America,” he insisted last August, “is a rising nation.” In office, Bush has said little about the trade deficit, though he’s indicated his strong opposition to Democratic proposals requiring additional registration of foreign investors.

Earlier this year, Bush trade representative Carla A. Hills suggested the United States may need to consider the managed trade approach favored by Gephardt--negotiating an overall balance in trade accounts rather than product-by-product access to Japanese and other markets. But the White House instantly rebuked her. That affirmation of the status quo has been the Administration’s most forceful statement. Unlike other foreign-policy issues, trade hasn’t been singled out for a high-profile “review” of Reagan policies. So far, said a Democratic congressional aide, the Administration “is treading lightly and very slowly.”

The public has demanded no more. Trade remains among the most perplexing of political issues. Polls now consistently show deep voter concern about the U.S. economic position: Americans routinely report that they consider Japan, not the United States, the world’s dominant economic power. Majorities say they consider Japan’s trading practices unfair, and worry about the rapid growth of foreign investment in the United States.

But these anxieties are diluted, often washed out entirely, by understandable satisfaction with the nation’s immediate economic circumstances. “I don’t know what the visible crisis is that will get people excited,” Gephardt said.

Nonetheless, observers across the political spectrum believe the force of persistent high trade deficits will force Bush to abandon his “don’t-worry-be-happy” pose. “I don’t think the idea that we can just live with it can be sustained,” said Archey. “The trade deficit is too much a number that throws out to the body politic, the public and businessmen a signal that we’re not cutting it.”

The pressure will come mostly from Congress. House Democrats last month signaled their intention to continue an aggressive stance by naming Gephardt to head a 26-member task force on trade and competitiveness. Even opponents expect some version of the Democratic foreign investment reporting legislation to pass Congress this year. It was largely congressional opposition to the FSX deal that spurred Bush to question parts of the agreement. And assuming Bush completes the deadlocked negotiations with Japan, congressional opponents are preparing a major effort to break the deal.

Many Democrats also want Bush to do more to help the nascent domestic “high definition” television industry, to create a civilian equivalent to the Defense Department agency that identifies and funds key emerging technologies and to integrate economic policy-makers within the National Security Council. On that front, the FSX controversy--which has seen the Commerce Department challenge the State and Defense departments--marks a watershed: However the disagreement is resolved, the economic impact of future military deals will be examined far earlier in the negotiating process.

More than anything the United States does, the real watershed in this controversy may be the prickly reaction of Japanese leaders to U.S. attempts to dictate terms. The United States has limited leverage--not only because few domestic analysts want Japan to build its own plane, but because debtors usually can’t muscle creditors. In fact, some believe the best argument the United States can make for asking Japan to buy existing U.S. fighters--an unlikely outcome--is that the Japanese must eventually buy additional U.S. products other than office buildings if we are to reduce debts and stabilize our economy.

“I can’t tell you right now which country has more leverage on the other,” Gephardt says. “No one can. They need to understand that the continuation of a $60-billion trade deficit is not in their interest. Perhaps our greatest leverage is to say ‘if our economy goes, your’s goes down with it.’ ” For an American politician, that’s Zen thinking--another sign of a new era.