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Exercise of Pique

April 14, 1985

Japan's latest and somewhat hazy new "market-opening" program, announced in response to continuing American charges of discriminatory trade practices, is likely to fall well short of placating an impatient Congress. As a result, the risk remains high that congressional frustration over the massive U.S. international trade deficit could be translated into some form of specific anti-Japan retaliation. Sen. John C. Danforth (R-Mo.), a leader of the retaliatory forces, is demanding action to inflict "at least some economic pain" on Japan. There is no doubt that such a policy can be concocted. There is no doubt, either, that the resulting pain would be felt by Americans at least as much as by Japanese.

Steps to restrict Japanese imports or to raise their costs by imposing tariffs might indeed cut into the profits of Japanese producers and jeopardize the jobs of Japanese workers. But other consequences also have to be considered. One of them, a certainty, is that American consumers would end up paying for this exercise of pique, as prices of products that they want to buy rose and as the choices available to them in the marketplace declined. The other consequence to be kept in mind is that Japan could give tit for tat and reduce its purchases of American goods. The United States is not the only country that sells the corn, the chemicals, the coal and the lumber that Japan must buy. If a trade battle begins, a lot of Americans are likely to be wounded before the last shot is fired.

Japan's leaders are taking American trade grievances more seriously than ever before, but they still have been unable to produce an adequate response. Prime Minister Yasuhiro Nakasone, in an unprecedented step, has publicly urged Japanese consumers and businesses alike to buy more foreign products, warning that the resentment caused by his country's large trade surplus with the rest of the world has become a "life and death" matter. But concrete steps to reduce or eliminate import barriers and open Japan to more foreign sales remain largely undefined.

Not until July will all details of the Japanese government's trade-liberalization proposals be revealed, and not for three years after under Nakasone's timetable will all those measures be completed. The Nakasone plan is the seventh market-opening proposal in the last four years. The first came when the U.S. trade deficit with Japan stood at $16 billion. By last year that deficit had reached $37 billion. For 1985 the trade imbalance is projected to reach at least $40 billion.

These facts are often cited by those who accuse Tokyo, with considerable justification, of moving far too slowly to get rid of protectionist trade barriers. But there are other facts to remember as well. One is that even if Japan lifted all of its restrictions today, the potential increase in U.S. sales would at best reduce this year's bilateral trade deficit by no more than 25%. Another is that Japan's share of the total U.S. trade defict has declined significantly in the last four years, even as deficits with Canada, Taiwan and Western Europe have been mounting. This condition has nothing to do with Japan's receptivity to American products. Essentially it has been caused by the huge appreciation of the dollar, which has raised the prices of U.S. goods sold overseas while making imported goods far more attractive here.

There is a clear need, as Nakasone has warned, for early and significant moves by Japan toward a more truly open market. But a congressional effort to try to force such steps by interfering with Japanese exports would be not only clumsily harmful to bilateral relations and almost certainly ineffective, but also directly damaging to American consumers and producers. While waiting for Japan to do the right thing, the United States must take care to avoid doing what's wrong.

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