Gambling on Foreign Trade

President Bush has used welcome moderation and careful targeting in putting together a list of alleged unfair trading practices under the so-called Super 301 provisions of the new trade law adopted last year. He has, in other words, made the best of a law that could, if not used with great care, trigger trade wars.

Japan’s angry and stubborn response will not help matters, because it once again fails to face up to the extensive protectionism, overt and covert, that operates in Japanese markets and also fails to recognize that Bush’s findings under the new law merely set the stage for negotiations.

The other two nations cited, India and Brazil, pose delicate problems, for many of the protections they have prolonged are similar to those that the United States itself used when it was seeking to develop its own industrial base. But the citation of those two nations also provides an opportunity for talks that can underscore the importance, in the modern world, of unencumbered trade for developing as well as fully industrialized nations. In the late 20th Century, development is not possible without a vigorous global trade and an open door to private investments. Furthermore, the citations could also encourage a more constructive response from the two nations in the new round of negotiation on the General Agreement on Trade and Tariffs (GATT). Both India and Brazil have obstructed expansion of GATT.

For the United States, the 1988 omnibus trade law also poses a problem because of the widespread recognition that the Super 301 provisions almost certainly violate GATT rules. Under the American law, the President is required to cite nations suspected of unfair trading practices and may impose sanctions if the problems are not corrected after 18 months of negotiations. That sort of unilateral action runs counter to the establishment of multilateral GATT arrangements.

Japan’s initial rejection of negotiations is disappointing. The American Administration had understood the sensitivity of Japan about making the list, but there was no way that Japan could be kept from the list. The imbalance in U.S.-Japanese trade accounts for almost half of the staggering U.S. trade deficit. Congress has been increasing its demands for action targeted on Japan because of the difficulties American exporters have had penetrating the Japanese market. The Administration could have drafted a list going beyond the supercomputers, satellites and wood products that were cited. The Japanese will be well advised to understand that, and to accept Bush’s short list as a cordial invitation to meaningful talks, a useful opportunity for both nations.