The War That Has No Winners : How to avoid a wingding trade war with Japan
The truism to keep in mind as the United States and Japan square off in their latest crisis over export and import policies is that trade wars have no winners. A trade war is a mutually destructive game of economic chicken. Consumers are always the biggest losers because trade sanctions, like protectionism, invariably lead to higher prices. For that reason if for no other, Washington must move prudently in this confrontation.
Two other truths need repeating. The first is that Japan clearly restricts access to certain key markets, including in greater or lesser degree the four--autos and auto parts, medical technology, telecommunications and insurance--on which the United States last week failed to win market-opening concessions. The second is that even if Tokyo were to lift all the barriers to market access it now imposes, America’s trade deficit with Japan would shrink by only 20% to 30%. Those are Clinton Administration figures. What they underscore is that, however Japan may rig the rules of the trade game, the biggest reason for the U.S. deficit now as in years past is that Americans simply continue to spend too much and save too little, to consume much more than they produce. The difference is made up with imports, with Japan--because of the quality and sometimes price of many of its products--a preferred supplier.
That’s why it’s absurd to look to Japan to unilaterally right the trade imbalance. At the same time it’s proper to ask--to insist--that Japan live up to its earlier market-opening agreements while moving to ease other unfair restraints, such as those in the four areas noted. The Motorola cellular phone case is an example of how an earlier market-opening agreement, this one dating to 1989, was not kept.
U.S. Trade Representative Mickey Kantor, in a move that was coincidental with but is now inescapably linked with the market-opening talks that failed last Friday, has found that Japan has not kept its bargain to allow Motorola Inc., a recognized world leader in cellular technology, one-third to one-half of the cellular phone business in the lucrative Tokyo area. Undisclosed sanctions are likely to follow.
Consider the Motorola finding a warning shot, an earnest of U.S. intentions, with other steps--ranging from complaints before the General Agreement on Tariffs and Trade to a big boost in tariffs on Japanese minivans and sport-utility vehicles--being threatened. But consider also the self-wounding effects that indiscriminate sanctions can have. The delicate task facing the Clinton Administration is to keep up legitimate market-opening pressures on Japan while avoiding the more extreme and ultimately debilitating measures that some domestic pressure groups are calling for in their self-interests.
