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Japan's Sun Has Risen, but to a Changing Scene

April 05, 1987|PAULA STERN | Paula Stern, a senior associate at the Carnegie Endowment for International Peace in Washington, was chairwoman of the U.S. International Trade Commission from 1984 to 1986 and a commissioner of that agency from 1978 through January , 1987.

Japan has grown up. Basically this is what President Reagan's trade representative acknowledged when he announced the Administration's $300-million retaliation plan against Japan's failure to stick to the last July's semiconductor pact.

That bilateral agreement prohibits dumping of Japanese semiconductors and provides increased access for American semiconductors in the Japanese market.

The Rising Sun finally has dawned on the White House. It now sees that Japan has risen to economic and technological parity with the United States. American policy is shedding the postwar image of Japan, a nation ravaged and vulnerable to the strains in the U.S.-Soviet rivalry.

The March 27 announcement that the Administration plans to retaliate is still sending shock waves through the world's economic system, and it may also force Japan to wake up to its stronger role in the world scene.

Others in Washington recognized the need for a change in Japan's role before the Administration did. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee, which handles all trade legislation, said: "There was (a) time when we were totally dominant in trade and we could dictate on trade. And we were so strong from an economic standpoint that we could afford to (concede) those points. But that time has long passed."

Bentsen is right. Forty years ago, the United States helped Japan set exchange rates that were intentionally undervalued to encourage an export-led growth there. We accepted Japan's closed markets as one means of getting its infant industries on their feet.

A mix of economic and diplomatic priorities--including the integration of Japan into Western political and economic institutions--led to the American push for multilateralism, which was embodied in the 1947 General Agreement on Tariffs and Trade (GATT).

But Japan did not join GATT until 1955, and until the 1960s the United States turned a deliberate blind eye to Japan's derogations from GATT principles in the name of economic resuscitation from the ravages of war.

The policy made sense at the time, and it worked. Japan--and Europe--became bulwarks of the industrialized world. But now the Japanese trade surplus that we tolerated--indeed, encouraged--has grown to an intolerable $60 billion.

Policy planners had been hoping that as Japan grew economically and technologically, it would shoulder a larger burden in the political as well as trading life of the Western alliance. Opening its markets wider to trade and investment would be a sign of greater burden-sharing.

Instead, U.S. policy-makers see Japan making only begrudging commercial concessions more consistent with a managed trade regime than an open trade system. It has tacitly but measurably controlled carbon steel exports to the United States. At President Reagan's request, it extended the carbon steel agreements, and since 1981 has kept automobiles on the "voluntary" control list. In 1986 it added machine tools to the list of controlled exports.

The change in U.S. policy in 1987 is to see national security and the needs of the Western alliance in a new light. Machine-tool restrictions were enacted under a different concept of national security than the one that dictated past U.S. policy toward Japan. This new policy also spurred the Administration's signal several weeks ago to Fujitsu, Ltd., to withdraw its plans to take over Fairchild Semiconductor Corp.

Now comes the contentious semiconductor pact, in which the United States is asking Japan to do the extraordinary--not to restrict its exports but to open its market to advanced U.S. products. This seemingly technical difference marks a significant departure in how U.S. strategists view Japan and what they expect of that nation.

America's latest demand for Japan to open its market in an area reserved for a strategic industry such as semiconductors goes to the heart of Japan's successful industrial policy of nurturing infant industries into commercial giants. The semiconductor pact is only the beginning of U.S. demands in this arena. We can expect the United States to push for a new code of conduct, one tailored for the 1990s instead of the 1950s, that will embrace other critical sectors, perhaps telecommunications, supercomputers and satellites.

As the value of the yen has skyrocketed, many in Japan resent bowing to these U.S. trade demands. The Japanese believe that it is America's economic polices that have fostered America's trade problems.

But if Japan will not open its markets to advanced American products, is unable to wean its infant industries and continues to refuse to abide by GATT principles, then it must expect retaliation. This is a turning point. The lag in historic mind-sets on both sides of the Pacific is catching up to the realities of economic events. Indeed, the Western alliance also has grown up.

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