Japan accounted for about one-third of the $123-billion trade deficit that the United States ran last year, but as far as Congress is concerned Japan accounts for virtually 100% of the worry and frustration prompted by that imbalance. The result is an increasingly angry and even ugly congressional mood that threatens not only to damage U.S.-Japan relations but to bring considerable harm to American consumers as well.
That mood was explosively demonstrated last week when the Senate, on a 92-0 vote, advised the President to take harsh measures if Japan doesn't quickly become more accommodating in its trade policies. In the House, at the same time, a powerful committee chairman was demanding that the United States start regarding Japan the same way it does the Soviet Union--as an antagonist. If the mood that these attitudes reflect is not entirely rational, least of all in urging punitive actions, neither is it entirely unprovoked. Japan has indeed stubbornly resisted the kind of liberalization of its import policies that could ease the trade imbalance. That resistance, though, hardly makes what Congress is threatening to do any more sensible or any more beneficial to Americans.
All nations, including the United States, shield some of their domestic producers against foreign competition. But no major trading nation more insistently maintains protective barriers against legitimate competition than does Japan. Congress, upset about the overall size of the trade deficit but unsure of what to do about it, has become especially agitated by Japan's posture in trade negotiations. But in its alarm Congress is cranking up to force measures that, while they would certainly harm Japan, would be unmistakably self-wounding to America.
One of those measures came out of the Senate Finance Committee the other day, in a resolution that labeled Japan an "unfair trader" and called on President Reagan to restrict Japanese imports unless more goods from the United States are quickly allowed into the Japanese market. The resolution calls for freezing the American trade deficit with Japan to last year's level. Since Japanese car imports are scheduled to rise this year, adding $2.5 billion or so to the deficit, that would require reducing other Japanese imports by a like amount. The resolution is non-binding. But the sentiment in Congress is such that a formal insistence for trade sanctions could soon be made.
Genuine trade grievances do exist with Japan, most notably right now over the issue of American access to the Japanese telecommunications market. But Congress should know that even if Japan removed all its trade barriers, the bilateral trade balance would remain very much in Japan's favor. The Treasury's own figures show that fully free market access would likely produce no more than $10 billion a year in additional American sales to Japan. That's certainly not peanuts, but neither is it the solution for closing the trade gap.
The fact is that Japan sells a lot of things that Americans want to buy, ought to be free to buy, and benefit from having, and so long as that remains true a trade deficit seems inevitable. That's not an excuse for Japan to hold fast to its protectionist policies; there is plenty that it can do to open its markets and reduce the deficit, and those things ought to be done. But it is an argument against the kind of vindictive and in-effective measures that Congress has in mind. It is a truism as old as commerce itself that when trade is restricted, consumers suffer. Four years of auto-import quotas that cost car buyers billions of dollars in overpayments has provided suffering enough.
The easing of auto quotas ought to bring car prices down before long. But the probable increase in imports from Japan, by as many as 450,000 cars a year, can also be expected to intensify congressional calls for a confrontational trade policy, all in the name of reducing the trade deficit. In fact, though, that deficit is likely to remain huge regardless of what Japan does or what Congress does to Japan.
The deficit has swollen to its current size mainly because the dollar is so strong. That strength makes American goods more expensive abroad and foreign goods cheaper here. Bashing Japan is clearly not an effective or responsible way to address this larger issue. The trouble is that in the present atmosphere responsibility may be forgotten, with grievous consequences for everyone involved. That's why Japan should treat what is happening in Congress now with the utmost seriousness. It is why Americans should be doing so as well, for in the end the retaliatory course that so many in Congress want to adopt would hurt them most of all.