Japan Gives U.S. Mixed Signals on Trade : On Summit’s Eve, Tokyo Unclear on Reforms It’s Willing to Make
On the eve of today’s meeting in Washington between President Bush and Prime Minister Toshiki Kaifu and just days before the start of talks on what the United States says are critically needed reforms in Japan’s economic structure, Japan is sending out mixed signals on its willingness to resolve economic differences.
An advisory group to the government’s Economic Planning Agency on Wednesday backed an American demand that Japan reform its complicated distribution system. Wholesaling and retailing, it said, “must become more open, competitive and consumer-oriented.”
But on Thursday, the Japan-U.S. Business Council issued a report criticizing Americans who advocate “managed trade” to help U.S. companies in their dealings with Japan. It insisted that Americans are ignoring significant improvements that have already occurred in U.S.-Japan trade patterns.
The council’s report was prepared under the guidance of a leading government economist, Masaru Yoshitomi, director of the Economic Planning Agency’s Economic Research Institute, and was issued with the backing of the Keidanren (Federation of Economic Organizations).
It cited only three problem areas in Japan that it said should be “addressed and examined” when talks on structural reform in both nations’ economies get under way in Tokyo on Monday. They are transactions among members of Japan’s business groups, or keiretsu , that the United States has charged exclude foreign sellers; retail price setting by manufacturers who control retail outlets, and the practice of pricing products differently at home and abroad.
The group’s report was one of the harshest criticisms of Japan’s distribution system issued by a government agency. In contrast, the report of the business council focused on attacking recommendations made to U.S. Trade Representative Carla A. Hills in February by a U.S. “advisory committee for trade policy and negotiation” that was headed by James D. Robinson III, chairman of American Express.
Robinson’s group called for a “results-oriented” industry-by-industry approach to solving America’s perennial trade imbalance with Japan, which in the first half of this year was running at an annual rate of about $50 billion.
The planning agency’s study group called for a review of restrictions on the establishment of large supermarkets and department stores that compete with Japan’s mom-and-pop shops and urged that consumers be informed of the discrepancy in prices of goods at home and abroad. It also criticized government inspections, procedures, standards and permits as impediments to imports.
The Japanese tradition of basing commercial practices on personal associations makes it difficult for newcomers to win trust and also add to the cost of entering the market, the study group said. It recommended that commercial customs, conditions, procedures and costs be codified and made known to foreign entrepreneurs.
The study group also criticized control of retailing outlets by manufacturers of automobiles, electronic goods and cosmetics. The practice, it said, not only keeps prices high but also impedes imports.
The agency’s study group urged that Japan’s anti-monopoly law be applied to remove impediments to competition created by manufacturers’ control of retail outlets and by deals giving a single company the exclusive right to handle a particular imported product.
Japanese consumers themselves were also criticized for equating high prices with high quality.
The Japan-U.S. Business Council, meanwhile, agreed that Japan must remove barriers to imports but insisted that such efforts be kept separate from attempts to measure how much of an increase in imports might be expected as a result.
“A ‘results-oriented’ . . . approach . . . would lead to obnoxious managed trade,” the businessmen’s group said.
The report said America’s failure to bolster domestic savings and cut its budget deficits had diluted the trade benefits of a weaker dollar for American exports by sustaining the U.S. appetite for spending. With strong demand at home, American production capacity has been insufficient to meet rising demand abroad, the report said.
Improve Competitiveness
“The problem is not with market access but with supply shortage,” it declared.
The United States, the council said, must enhance its international competitiveness “by improvements in the combined ability to compete in terms of price, delivery and technology.”
The report also pointed out that Japan’s large trade imbalance with the United States has persisted since the 1985 agreement to drive down the dollar’s value mainly because Japanese exporters had raised dollar prices for their goods by 52%--overwhelming an 87% increase in the value of American exports to Japan.
“Why should U.S. corporations be frustrated by higher unit prices for Japanese exports? On the contrary, one would expect U.S. firms to be elated, as these higher unit prices make their own goods more competitive vis-a-vis Japanese goods,” the report said.
The business council faulted Americans for overlooking the fact that the volume of Japan’s imports of manufactured goods has more than doubled while the value of such imports--now more than $100 billion a year--has increased by more than 50% since 1985.
In contrast, Japan’s export volume has risen by only 10.8% since 1985, the council’s report noted.
Yoshitomi, the planning agency economist, told foreign reporters that America’s trade deficit with Japan stemmed primarily from “macroeconomic factors,” such as domestic demand and exchange rates, not from Japan’s trade barriers. He declared that the trade imbalance issue should not be linked to structural issues.
