Why Protectionists Sense an Opportunity for Victory : Trade: No Japan expert has been appointed to any foreign-policy post at a time when U.S. needs a strategy to deal with economic aggressors.

Newly elected President Bill Clinton promised to assemble a team of America’s most talented international-policy specialists who would get serious about Japan. After two administrations that merely reacted to trade and economic crises as they arose, his pledge kindled optimism that, at last, an Administration would face up to a post-Cold War challenge.

That was in November. Since then, no major Japan expert has been installed in the State Department, Commerce Department and in the Office of the U.S. Special Trade Representative. Harkening back to the 1950s when mainland China was the focus of America’s Pacific interests, the new Administration is dominated by Sinologists who believe that human rights--not economic or technology issues--is the primary U.S. concern in Asia.

Indeed, virtually all of America’s top foreign-policy posts have been filled with Europhiles who view such problems as Bosnia-Herzegovina or Saddam Hussein as the “real” stuff of international relations. Apparently discounting the remarkable global changes of the last decade, they regard the Asia-Pacific region as comparatively unimportant. The trade and technology disputes typical of the region are dismissed as minor irritants that should not detract us from the business of maintaining Cold War alliances with old friends like Japan.

The Administration’s ostensible reaffirmation of the trade and foreign-policy status quo has opened the door to a parade of special interests seeking protection from competition, among them the Big Three. The absence of even a semblance of strategy means such pleading is evaluated on a purely ad hoc basis. Few advocates of a principled U.S. trade policy could have been cheered by the sight of U.S. car makers opportunistically bidding for huge import restrictions, an effort they abandoned only last week.

The United States simply cannot rush headlong back to the future and have a prayer of addressing the challenges posed by Japan and other ascendant post-Cold War powers. For decades, one-way flows of wealth, knowledge and latent power to Japan were tolerated on the grounds that having an anti-communist ally in the North Pacific overrode the pain created by economic inequities. With the decay of the Soviet Union, however, the steady drain of U.S. resources overseas and the lack of reciprocity from countries like Japan have become at least as important as Washington’s infatuation with the strategic alliance game.

Protectionism is an unacceptable response. Trade restraints in autos, electronics, textiles and other industries have harmed U.S. companies and business practices, increased corporate profits at the expense of American consumers and helped finance the transfer of U.S. jobs to low-wage countries in Latin America and Southeast Asia. All too often protectionism ends up protecting profits, not American jobs and skills.

The United States needs to recognize the value of international exchanges--even with aggressive countries like Japan--while ensuring that the welfare of its citizens is not sacrificed by trade. Key elements of an effective, nuanced U.S.-Japan and Asia policy include the following:

* Capital recycling . Countries that profit handsomely from doing business with the United States must continuously reinvest some of those earnings in America to create high-quality jobs and stimulate growth. Fundamentally mercantilist nations like Japan, however, are fair-weather friends; they often abandon the U.S. market during times such as recessions when their investments are most needed. U.S. policy should thus insist on a constant repatriation of capital as a condition of maintaining trade relations.

* Direct foreign investment . As a Japanese economist explained, “Japan’s multinationals will get away with whatever you allow them to do; once they understand the rules, they will comply.” In response to concerns that Japanese investments in the United States have displaced full-scale U.S. industries with “shell” enterprises importing high-value-added goods, many Japanese firms have, in fact, reinvigorated declining U.S. industries and are, however reluctantly, building supply relationships with U.S. producers. Foreign investors must be continuously pressured to fully integrate their operations into the domestic American economy.

* Technology transfers and procurement . The United States must not be seduced by the notion that simply equalizing bilateral trade balances or securing fixed import shares of Japanese or other markets--the managed-trade approach--will necessarily foster domestic skills and business opportunities. Much of Japan’s declining trade surplus with the United States, which dramatically expanded last year, was achieved by Japan diverting its production to other countries in Asia and exporting to the United States from those locations.

As is common in many Asian and European countries, the United States should explicitly insist that overseas firms transfer technology and buy goods and services from U.S. businesses in return for access to the U.S. market. By closely monitoring and policing the flow of technology and procurement orders from our overseas partners, the United States can help assure that domestic workers and companies directly benefit from efforts to gain access to foreign markets and reduce trade deficits.

* Information reciprocity. America’s traditional concern with alliance-building has made it remarkably diffident toward the outward flow of technical and strategic information to countries like Japan. Indeed, officials throughout the government and those at key research and development centers seem to believe that they have an obligation to include foreign participants, and especially the ubiquitous observers from Japan, in virtually any project or government strategy session.

Countries such as Japan shield their public and private information must more closely. Indeed, as trade tensions have grown, many Americans have been denied access to materials in Japan that would have been routinely provided to their Japanese counterparts in the United States. It is hardly sensible for the United States to casually hand over its economic and strategic game plans to its most sophisticated industrial competitor without insisting on specific, comparable reciprocity at all levels of the Japanese government and private sector.

To foster mutually beneficial relations, the United States must take Asia and Japan seriously and immediately staff its international-policy positions with people experienced with the industrial realities of the region. The President’s failure to act on this promise may be more costly in the long run that all the other broken promises combined.