U.S. Urges Japan, Germany to Cut Trade Surplus

Treasury Secretary Nicholas F. Brady today urged West Germany and Japan to reduce trade surpluses at the start of a two-day economic conference dominated by friction over U.S. trade policy toward Japan.

“The industrial countries have agreed that reducing the large existing trade and current account imbalances is a matter of priority,” Brady told the conference of the Organization for Economic Cooperation and Development.

“Japan’s trade surplus declined modestly last year but has increased for three consecutive quarters,” Brady said. “Germany’s trade surplus continues to grow, and contributes importantly to the major imbalances that have developed within Europe.”

The OECD ministerial-level meeting opened amid Japanese lobbying for a censure of U.S. trade policy after the Bush Administration’s decision to cite Japan as a nation with trade barriers harmful to American companies.

The United States, which also cited Brazil and India as trade offenders, said the decision to cite Japan was made because of its refusal to buy U.S.-made satellites and its barriers on U.S. lumber products.

Japan, the only OECD member nation on the list, would like the OECD to criticize the “unilateral trade action” in its final communique after the conference ends Thursday.

U.S. Trade Representative Carla Anderson Hills defended the Bush Administration decision on the eve of the OECD meeting, saying its goal is to “open and expand markets.”

Brady said the Bush Administration is “fully committed” to reducing the U.S. budget deficit.

“But many in the United States feel we are being urged to act in a vacuum,” he said. “U.S. policy alone does not drive international economic developments, and international policy prescriptions for current problems cannot end with U.S. fiscal action.”

“Sustaining growth and reducing external imbalances also requires that steps be taken by the surplus countries,” Brady said. “Action by Germany and Japan is particularly important.”

The Treasury secretary also expressed concern over the rise of the dollar against other major currencies, saying it could hamper cooperative efforts toward adjustment by members of the Group of Seven top industrialized democracies.

“If the dollar’s recent rise is sustained for a prolonged period, or extended, it could undermine our adjustment efforts,” Brady said.

The OECD, made up of 24 non-communist nations, was formed to coordinate policies that promote economic and social welfare and assist developing countries.