U.S.-JAPAN TRADE ACCORD : Trading Challenges

Since World War II, U.S. trade relations with Japan have been dominated by one quarrel or another over commodities such as semiconductors, television sets, baseball bats, bicycles, citrus fruit and, of course, automobiles. The disagreements have centered around U.S. accusations that Japan floods the American market with goods while placing restrictions on what America can export to Japan. Inequities--which have contributed to an unprecedented U.S. trade deficit--are exacerbated by a penchant for saving in Japan and a drive to consume in the United States. Some highlights of the tumultuous trade relationship between the two countries:

1900s: At the turn of the century, Japan, in need of raw materials from other nations, begins increasing its international commerce dramatically. In 1893, 86% of the ships entering Japanese ports were foreign. By 1913, half the ships entering those ports were Japanese.

1920s: After World War I, Japan replaces Britain as the world’s major spinner of yarn. The country’s trade balance moves into surplus as Japan begins to upgrade its production performance.

1930s: To stem high unemployment, the United States raises tariffs on Japanese products such as raw silk and cotton fabrics. In Japan, three-quarters of all motor vehicles are made by Ford and General Motors. As WWII approaches, Japan is exporting textiles, oil, canned fish, tea and pottery to America, and receiving cotton, oil, wheat and scrap metal. An oil embargo by the United States precipitates Japan’s entry into WWII.


Late 1940s-1950s: During the postwar U.S. occupation of Japan, America supplies two-thirds of Japan’s imports, the majority of them agricultural products. The United States receives nearly a quarter of Japan’s exports. Imports account for 60% of the Japanese auto market.

Early 1960s: Japanese shipyards account for half the world’s tonnage. In 1964, Japanese vehicle production begins growing exponentially and the United States records its first trade deficit with Japan. Japan’s auto production surges nearly 1,000% from 1964 to 1984, capturing nearly a quarter of the world market.

1970s: U.S. officials allege that increasingly large exports of Japanese fish contain fish caught off the California coast and present unfair competition for U.S. companies such as Starkist. Although beginning to emerge as a strong industrialized nation, Japan continues to practice restrictive trade measures.

1971: The U.S. Tariff Commission finds that Japanese TV imports present a serious danger to the U.S television industry. Within five years, these imports account for 98% of the U.S. television market.

1978: Japan completes its incremental downsizing of its textile industries, which accounted for 52% of the nation’s total exports in 1936 but has dropped to 5% by 1978. This decrease allows the country to concentrate its energies on more sophisticated products, including engineering goods, cameras, ships and vehicles.

1980s: Deciding they have indulged Japan for too long, U.S. officials begin to step up efforts to equalize the enormous trade deficit between the two countries. In 1981, the United States negotiates a voluntary restraint agreement on Japanese autos, limiting annual imports to the United States to 1.68 million vehicles. Officials renegotiate this agreement in 1985 to allow 2.3 million.

1986: Japan agrees at the “11th hour and 59th minute” to stop selling computer chips at below-market prices. As part of the agreement, Japan says it will help the United States increase its import penetration of semiconductors to 20% in five years. When this quota does not materialize, the two countries renegotiate the agreement in 1991. The 20% goal is achieved in the early 1990s.

1987: In the most sweeping trade retaliation the United States has taken against Japan since the end of WWII, President Ronald Reagan announces 100% tariffs on selected Japanese electronics imports, including color televisions, laptop and desk computers and certain hand power tools. The move is said to affect as much as $300 million in Japanese imports.

1987-90: The United States files 27 complaints accusing Japan of “dumping"--selling exports at below cost or cheaper than in the home market. Cellular telephones, forklift trucks, all-terrain vehicles and computer chips are among the products cited.

1988: Japan lifts 20-year quotas on beef imports. In 1994, the United States exports $1.3 billion in beef to Japan.

1992: Japan agrees to import more U.S. car parts and 20,000 more American cars, doubling the number of autos imported annually.

1994: Japan sells more “transplants"--Japanese cars manufactured in America--in the United States than vehicles imported from Japan. While transplant manufacturers provide jobs in America, they still rely on vehicle parts imported from Japan.

February, 1995: For the first time, Japanese consumers buy U.S.-grown apples as part of an agreement that ends a contentious 24-year battle by U.S. apple growers to get into the Japanese market.

April, 1995: America’s trade deficit with Japan climbs to a record high of $11.4 billion.

May, 1995: In what could be the largest trade penalty since WWII, the United States threatens 100% tariffs on 13 Japanese luxury cars, affecting $5.9 billion worth of goods.

June 28, 1995: Negotiators reach an agreement in Geneva. Japan agrees to open its markett for autos and car parts and the United States calls off the tariffs.


The Trade Deficit

Since 1964, when the United States posted its first trade shortfall with Japan, the deficit has exploded, reaching an all-time annual high of $65.7 billion in 1994. America’s trade deficit with Japan since 1970, in billions of dollars: ’94 -$65.7 Sources: Automotive News, “A Political History of Japanese Capitalism”; Datastream; “Japan Without Blinders”; Prof. Leon Hollerman, Claremont McKenna College; Times reports, wire reports