A Balance of Hostility, Not of Trade : Japan: A very efficient social system is now seen as a ‘structural impediment.’ Tearing it down may be too high a price for the limited gain.
Despite repeated failures, the U.S. and Japanese governments are still trying to manage their increasingly emotional trade relationship in strict accordance with textbook free-trade theory. Within that narrowly economic perspective, consumer access to ever-more and ever-better goods is the only goal, protectionism the only evil, devaluation the sovereign remedy and all cultural and social consequences are simply disregarded.
So far, the impact of free trade has all been felt on the American side. Jobs have been lost or threatened; entire communities, as well as industries, forced into decline. Add to that the spreading uneasiness caused by Japanese ownership of more and more banks, factories and office buildings in the United States.
As a result, anti-Japan sentiments are now frequently heard in private conversations. They intrude into the media’s treatment of subjects from education to tax reform, and they increasingly shape congressional votes on trade, technology and investment issues. As American opinion polls show, Japan has displaced the Soviet Union as Chief Enemy.
Despite a rising undertone of Japanese contempt, the United States remains Chief Friend in Japan, precisely because barriers there have ensured that very few Japanese suffer from the impact of free trade. When the dollar was devalued five years ago to make imported Japanese goods more costly and American exports to Japan cheaper, the theory was that improvement in the trade balance would be proportionate. In fact, the devaluation was huge (from its 1985 average of 238 yen, the dollar declined to 144 by 1987) but Japan’s trade surplus increased, from $39.5 billion in 1985 to $47.6 billion in 1988. Last year, the surplus was $49 billion. Meantime, antiJapan feelings continue to intensify.
One textbook solution having failed, another is now being applied without so much as considering the possibility that the textbook may be wrong. The current official remedy, the Structural Impediments Initiative talks, could indeed even the score between Americans and Japanese, but only by achieving a balance of hostility, not trade. Ostensibly, the talks include the U.S. budget deficit, America’s low savings rate and shortcomings in education. Actually, they focus on Japan’s virtual prohibition of rice imports and its notoriously import-rejecting marketing structure.
The Japanese have pledged to review strict regulations that prevent the spread of supermarkets and department stores in Japan, and thus make it harder to sell foreign goods. More than 2 million small shops and thousands of equally small-scale wholesalers also constitute a major barrier to imports because they depend on credits from domestic suppliers or banks connected with them.
With its high markups, the Japanese system is economically inefficient and costly for the consumer. Socially, however, it is very efficient indeed: The system provides the dignity of self-employment for roughly 6 million Japanese too old or too unqualified for industrial or office jobs. They are mostly the sort of people whom the consumer-as-taxpayer would have to subsidize in any case, by way of pensions and welfare. If the Japanese in fact permit supermarkets and department stores to spread more freely, more American imports might flow in. But the cost for Japan would be massive unemployment and a further degradation of an already sad urban landscape, because those small shops enliven dreary streets and serve as social venues for the elderly.
Japan’s rice farming is even more inefficient economically, and even more important to maintaining the country’s social equilibrium. Only 4.6 million Japanese are full-time rice farmers, but they preserve much of what is authentic in Japan’s culture: rice ceremonies, seasonal festivals, folk songs and rice-paddy scenery. Because of their minuscule holdings, the farmers could not survive without government protection.
The Structural Impediments Initiative consists mostly of pledges to do something in the future, but Japan’s farmers and shopkeepers already know that in the eyes of Washington they are nothing more than “structural impediments.” Along with their dependents and sympathizers, they constitute tens of millions of Japanese who now have good reason to dislike the United States, much as so many Americans already dislike Japan. The political price is much too high for the imagined gain, because even if not one small shop or rice farmer remains, American exports are not expected to increase greatly. The impulse behind the Structural Impediments Initiative is doctrine, not profit.
Considering that something must be done to correct the U.S.-Japan trade imbalance, the only true remedy would be to abandon doctrine and embrace heresy by demanding that Japanese exporters buy from their industrial counterparts in America and/or limit their sales (“voluntary restraints”). Previous attempts failed because they were half-hearted (cars are still limited by number, not value) and because industrial components were included, increasing costs to American manufacturers. Only consumer goods should be limited--and by value.
To do this is only to recognize the changed relationship between the economic benefits of free trade and its social costs. Free trade once provided food for the hungry and clothes for the naked. Today, it mainly supplies more gadgets to the gadget-laden. That’s not worth the misery of unemployment, the disruption of communities and the dislocation of entire cultures.
