Global Wars Are History--Now for the Tough Part
Even as the world looked back 50 years to the end of World War II, a few U.S. actions last week signaled the different course we’ll sail in the next 50.
The trade dispute with Japan, the beginning of serious congressional action to cut the budget deficit and even President Clinton’s minor-key visit to Russia said that the Cold War as well as the World War are history.
The future, if less starkly dangerous than in recent decades, will be more exacting. The United States will have to fight for markets among newly emerging economies, lead but know its limits in a multipolar world and not assume that other nations will eagerly finance a higher American standard of living.
Japan undoubtedly will have to arm itself--and cease paying $6 billion to support U.S. military personnel like mercenaries on its soil.
A turning point in U.S.-Japan relations was reached last week as the Clinton Administration threatened to hit Japan with $1 billion in punitive tariffs and haul it before the newly formed World Trade Organization.
Through two decades of trade disputes, Japanese cars and trucks have captured one-quarter of the U.S. market and accounted for two-thirds of the U.S.-Japan trade deficit ($66 billion last year), while U.S. cars gained only 1.5% of Japan’s market.
The worm is turning now because U.S. industry can no longer afford to cede Japan’s huge market of 6.5 million vehicle sales per year--13% of the world’s total.
Moreover, Japan’s isn’t the only market that concerns the Administration, a government official says. The focus is also on the growing markets of emerging Asia--South Korea, Thailand, Indonesia, Malaysia and potentially Vietnam and China--where U.S. auto makers are investing $3 billion in an attempt to catch dominant Japan’s auto companies.
Many of those countries, like Japan before them, developed economically by selling to U.S. consumers in trade relationships that owed more to Cold War strategy than economics.
The Cold War was a cost but also an excuse. As the U.S. government ran budget deficits to pay for global defense, as well as social programs at home, it financed them partly through the sale of Treasury bonds to foreign investors. And the world bought U.S. paper willingly because military protection was needed.
But soldiers are cashiered in peace time. Lately, governments and corporate investors have been “diversifying out of dollars,” in financial parlance, sending a signal that the United States had to take serious measures to curb its trade and budget deficits.
That’s why the deficit reduction plans introduced in Congress last week were more than politics as usual--however much they looked like politics. There were outcries when Republicans pledged to cut Medicare in order to bring the $200-billion deficit to zero in seven years.
“But the important thing is that a debate has begun on cutting the size of government to suit changed times,” says economist John Cogan of Stanford University.
As if impressed by signs of firmness on trade and the budget, financial markets sent U.S. bond prices and the dollar up sharply.
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But don’t pop the champagne. Good intentions are not the same as backbone. The Clinton Administration will have to follow through on its threats to Japan. If it changes its mind or accepts a pallid compromise, Asian nations that want U.S business actively engaged in Asia will turn away in disgust.
And if current resolve on deficits becomes just more bluster, the dollar and bond prices will sink once more.
In considering these issues, keep in mind that the world is not a simple place.
The United States, under Gen. Douglas MacArthur’s postwar administration, encouraged Japan’s protectionist economy to begin with. And such attitudes prevailed for more than 40 years. In the 1980s, when European countries suggested collective action to open Japan’s markets, U.S. authorities demurred so as not to disturb strategic relationships with Japan.
And the rising yen of the last decade--U.S. misconceptions notwithstanding--helped Japan. In response, the Japanese government helped companies move production offshore, which is how Japan’s industry, including its car companies, got such a hold on East Asia’s growing markets.
Nor are all Japanese companies alike. Toyota has reached out to U.S. parts suppliers, including Dana Corp., the Toledo, Ohio-based maker of drive train components, which has become a Toyota supplier in Japan and Thailand as well as the United States.
All of which is to say, not surprisingly, that Japan, the world’s second-largest economy at roughly two-thirds that of the United States, is complex.
But in political terms, Japan remains an overgrown adolescent, drifting and uncertain today and protected by the U.S. military--45,415 Marines, Air Force, Navy and Army personnel for whose presence Japan pays the U.S. government $120,000 per head plus other costs, adding up to $6 billion a year.
It’s an unhealthy relationship that will change soon. Japan can then spend its trade surpluses on a military force of its own.
And that, in turn, will change not only U.S.-Japan relations but security equations all over Asia.
But at the end of almost a century of war, both hot and cold, change is inevitable. Even relations with Russia, which Clinton visited last week, have become normal, says Charles Wolf, director of Rand Corp. and an expert on Russia. “It is a big nation that we differ with on many questions but do not fight with. It’s almost as normal as France.”
In the future, the United States will have to cut its military cloth to fit its needs--as the leading world power still, but not the lord protector of all. Economically, it must compete for what it earns.
Happily, it is well prepared to do so. Having come through restructuring of its industry--a response to the challenge of Japanese competition--U.S. industry is strong today, with productivity growth better than it has been for decades.
If it keeps its resolve on the budget and on Japan, the last unfinished business of World War II, then the next 50 years can be an age of confidence--which beats nostalgia any day.
