Hills Says U.S., Japan Are at ‘Crossroads’ - Trade: An American official lauds Tokyo’s economic accomplishments but charges that Japan remains insensitive to ‘fair and open competition.’
U.S. Trade Representative Carla A. Hills declared Friday that the United States and Japan stand at a crossroads, facing the threat of “the destruction of the world trading order.”
Hills made the statement at a news conference at the Japan National Press Club squeezed in between meetings with Prime Minister Toshiki Kaifu, four of his Cabinet ministers and three other political and business leaders.
In response to a question, she said she did not believe that Japan’s economic power is a “threat,” unlike a Newsweek poll that found that 52% of the American people consider it a greater threat than the military power of the Soviet Union.
“Japanese economic power . . . is a wonderful accomplishment. But I do see the destruction of the world trading order as a threat,” she declared.
Hills said the Newsweek poll reflected “a certain level of anxiety and frustration by the American people (and) their representatives in our Congress” arising from “a strong feeling of inequity where the American market is open and the counterpart market overseas is closed.”
“We must work together to bring down that level of . . . frustration and anxiety,” she said. Otherwise, she added, the United States and other countries will turn to protectionism.
“I see us at a crossroads--a crossroads where we can eliminate barriers to trade and have worldwide competition and a vibrant world system . . . or, alternatively, the peril that the anxieties will grow so large that individual markets turn inward,” curtailing both global trade and prosperity, Hills said.
“The global trading system . . . cannot function when the second-largest market of the world does not fully participate,” she declared.
In her speech, Hills charged that Japan remains insensitive to “fair and open competition.” Thus, it “undermines support for free trade and feeds the fires of protectionism.”
Hills, nonetheless, blamed the bilateral trade imbalance, which is running at a rate of about $50 billion this year, not on Japanese barriers but rather on “macroeconomic factors.”
“We know that we save too little in the United States and invest more than we save, and therefore must import foreign capital to make up the difference. You know that your consumption rate is quite low, and that that accounts, in part, for your surplus.
“So it is macroeconomic factors that drive our deficit and your surplus,” she said, accepting the argument that leading Japanese economists have been making.
She also said the United States is not adopting a “results-oriented” approach toward Japan because demanding specific reductions in its trade imbalance would lead to “managed trade.” Rather, she said, the Bush Administration aims “to create a truly competitive global environment--one where entrepreneurs, not government officials, will determine how industries and farms compete and how nations trade.”
“We want to get government out of the business of making steel, building ships, selling grain, growing beef. . . . And we want to end ‘sweetheart’ deals that rob competitors of a fair chance to compete,” she said.
She complained about obstacles to foreign investment in Japan, barriers against foreign lawyers, collusive bidding in construction and bureaucratic obstacles to imports.
“A U.S. plastic baby bottle was apparently kept out of Japan by the Ministry of International Trade and Industry (MITI) because it had measurements in both the metric and English systems. As a mother of four, I can assure you that a hungry child does not care which way its formula is measured,” she said.
The result of such restrictions, she said, was to force Japanese consumers to pay $46 in Japan for a Sony Walkman that costs $32 in the United States, $800 for a 21-inch color TV that sells for less than $500 in the United States and $1,700 for a round-trip air ticket between Tokyo and Los Angeles that can be purchased for $950 in the United States.”
Hills reiterated demands for an opening of markets to supercomputers, forest products and satellites--the three fields in which her office has threatened to retaliate against Japan under Section 301, the “unfair trading” provision of the Omnibus Trade Law of 1988.
She also unveiled new accusations against Japan.
Toys R Us and McDonald’s, she complained, had been told that they would have to wait two years to open toy stores under a joint venture in Japan, compared to “no wait at all” for Japanese firms investing in the United States.
And just last week, she added, an American high-tech lamp manufacturer, Fusion Systems, complained about Mitsubishi Electric “flooding” the Japanese Patent Office with 300 applications for patents closely related to the core technology of the American firm.
“If these applications are granted,” she added, “Fusion Systems believes it could not sell today in Japan the same lamp it first sold to Mitsubishi in 1977.”
“My message today is straight-forward: Anti-competitive practices, whether official or private, run counter to the world we seek and to the world that brought Japan its prosperity,” she said.
