Must Friends Bicker Endlessly? : Surely Tokyo and Washington can avoid a trade war
The Clinton Administration is considering slapping trade sanctions on a foot-dragging Japan. Not surprising. Once again Tokyo refuses to make commitments to expand market access for U.S. cars and auto parts. At the same time, it has the colossal chutzpah to accuse the United States of attempting to manage trade--this from a government widely regarded as the world’s most consummate mercantilist. Give us a break, please.
Japan has long enjoyed the fruits of an open and welcoming U.S. market for its products while it has coddled its own domestic market, shielding it from foreign competitors. True, Tokyo has made recent--and considerable--progress in opening up to imports of fruits, rice, beef and other products. And there’s no denying that Detroit was slow to adapt its business practices and its vehicles to the needs of Japanese consumers, like providing right-hand drive. But the Japanese are starting to buy American cars (of course only when and where they are available, which, because of the Byzantine ways of doing business in Japan, isn’t often enough). Given more opportunity, might more Japanese “buy American”?
DRAMATIC BREAKDOWN: Tokyo is not willing to let market forces determine whether Big Three auto makers can sell more cars and auto parts in Japan. Dramatically, in Canada last Friday, a breakdown occurred in negotiations on the contentious issue between U.S. Trade Representative Mickey Kantor and Japan’s trade minister, Ryutaro Hashimoto.
The auto sector, the heart of the U.S. manufacturing base, accounts for 56% of the $65.7-billion U.S. merchandise trade deficit with Japan. U.S. car sales amount to only 1.5% of the Japanese auto products market, while the U.S. figure in Europe is 2.6%. Japan captures a whopping 24% of the American market.
Tokyo is adamant in refusing a U.S. request for voluntary measures by Japanese car makers to buy more auto parts. An apparently furious Clinton Administration is weighing sanctions, including tariffs of up to $1 billion on Japanese auto imports. Japan could avoid selective sanctions by reopening talks and offering substantive initiatives, instead of quibbling over an endless litany of numbers and assuming a disingenuous-- even laughable-- free-trader stance.
BILATERAL IS BETTER: The goal should be to resolve the issue on a cooperative, bilateral basis. Instead, Japan wants to involve the World Trade Organization. Only as a last resort should the WTO, the multilateral free trade group that succeeded the General Agreement on Tariffs and Trade, take up the issue. (A mediating role was envisioned for it by all the signatory nations, especially the WTO’s prime mover, the United States.) Of course, Tokyo’s motive for the WTO ploy is to buy time; Washington might shrewdly see better chances for itself before the WTO than in its endless sumo match with Tokyo’s negotiators.
In the 50 years since the end of World War II, Washington and Tokyo have spent half the time stuck in one trade standoff or another. But the rancor and divisiveness in the auto impasse are especially bitter. Tokyo has long hungered for stature and respect commensurate with its economic clout. But such a reputation is built on exercising leadership and initiative--and wise, generous compromise--not defending the status quo. Any real trader helps build markets by expanding its own, not just by milking others.
Japan now should open its own auto market and play fair. If it’s sad that Washington is on the verge of reverting to trade sanctions, it’s equally unfortunate that Tokyo feels it has to push this issue to the WTO rather than settle maturely with its No. 1 ally.
