WASHINGTON — One of this country's most important international banks came out Monday in favor of a substantial increase in U.S. tariffs against imports from Japan to force the Japanese government to open its markets further to goods from the United States and other countries.
Morgan Guaranty Trust said it opposed a general surcharge on all U.S. imports, but it said the case of Japan is special.
"A targeted surcharge on U.S. imports from Japan, for example, would speak volumes," the bank said in the March-April edition of its publication, World Financial Markets. It was made available to reporters in Washington on Monday.
It argued that a targeted surcharge would be better than U.S. quotas on imports from Japan or than "voluntary" restraints such as the Japanese limit on auto exports.
"Rather, a substantial targeted surcharge, with standby authority for a still higher levy, could play a highly constructive bargaining role in opening up Japan's sheltered markets and in making a reality of the two-way trade on which a liberal world trade order must ultimately rest," the bank said.
Last year, the United States bought $123-billion more in goods and services than it sold to the rest of the world. Trade with Japan was responsible for $37 billion of this deficit.
"Nothing less than a powerful shock . . . is likely to jolt Japan into radical reordering of its trade strategy," the bank said, suggesting a shock on the magnitude of the 1970s oil crises.
It urged a long-term "international strategy" as the best way to approach the U.S. trade deficit.
"It is now high time to tackle not just the U.S. current account deficit . . . but also the similar surplus of Japan and the still larger surpluses of the Netherlands, Switzerland and Taiwan," it said.
Larger Trade Surpluses
Though these countries are smaller than Japan, their trade surpluses are larger in terms of each country's total production.
But the bank said no strategy will get anywhere without the United States curbing its federal budget deficit. Morgan Guaranty said it favors budget cuts over tax increases to do that and tax reform to lighten the burden on productive economic activity.
Japan should invest in such neglected areas as public housing, sewers, education and cultural and recreational facilities, the bank suggested. It added that those investments could be financed by tax increases.
It also called for a change in the Japanese tax system to encourage consumption and to make credit more attractive to consumers, more Japanese spending on foreign aid and a cut in personal taxes.