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U.S. Remains Shocked, Shocked That Japan Won't Change Its Habits : Trade: Again and again, U.S. negotiators refuse to see it is Japanese society that mandates an essentially closed economy.

February 17, 1991|Clyde V. Prestowitz and Gioia Marini | Clyde V. Prestowitz, a former U.S. trade negotiator, is the author of "Trading Places: How We Allowed Japan to Take the Lead" (Basic.) He and Gioia Marini are president and research assistant, respectively, at the Economic Strategy Institute

WASHINGTON — Let's stop spanking Japan. The posture is humiliating for both countries.

U.S. negotiators were in Tokyo recently to follow up on the implementation of the agreement reached in the Structural Impediments Initiative talks last summer. They reported little progress in the negotiations, which aim to reduce a wide variety of informal trade barriers permeating the Japanese economy and to eliminate U.S. policies, such as massive budget deficits, that hamstring America's trade performance.

The U.S. negotiating team actually managed to sound surprised and somewhat hurt. Remarking on Japan's lack of support for U.S. efforts in the Uruguay Round of the General Agreement of Tariffs and Trade and in the Persian Gulf, Undersecretary of State for Economic Affairs Richard T. McCormack said that Japan's inability or unwillingness to open its economy "could contribute to a move in my country toward protectionism."

But wait a minute. Isn't SII the same agreement that, last spring, U.S. trade officials said resulted in the most far-reaching set of market-opening reforms ever to be implemented in Japan's economy? Didn't U.S. Trade Representative Carla Hills, as recently as July, praise the Japanese for finally undertaking the structural changes needed to open their markets. Didn't she project substantial improvements in America's trade deficit as a result?

Yogi Berra said it well: It's like deja vu all over again. In 1982, the Ezaki Package of market-opening reforms was introduced by Tokyo. Then there was the Nakasone trade plan, the Maekawa Report, the MOSS talks--all praised as far-reaching blueprints that would bring Japan's economic priorities in line with other industrialized countries; all hailed as the final answer to the U.S. trade deficit, and all followed by the same song and dance in both capitals.

How many times have we warned of a move to protectionism when our hopes have been dashed? The problem is that Washington's repeated threats of punitive trade actions have failed to push the Japanese to open their markets.

Our constant fluctuations between good cop and bad cop, between carrots and sticks, do not change anything we would like to see changed in Japan's business practices. If anything, they undermine U.S. credibility in trade negotiations. In fact, we've exhausted all the different methods of trying to convert the Japanese to our liberal economic principles. We have used persuasion, the threat of force, diplomatic pressure, economic trade-offs and guarantees that we will "try harder" to get our house in order. Isn't it time we realized the Japanese are not going to change?

This is not to say that Japanese trade practices are unfair. The word "unfair" implies the Japanese are deviating from a set of agreed-upon economic rules and priorities. U.S. trade officials believe those rules are best for the United States and best for the rest of the world, too--for example, the sovereignty of the consumer and the shareholder and tough antitrust policies and other sharp curbs on corporate power.

But Japan never agreed to these rules. The Japanese have developed their own philosophy on economics, one focusing on production rather than consumption and that nurtures big business--especially the keiretsu , the huge business combines with links between finance and industry that would be illegal in America.

Japan's record in building prosperity and economic power has been impressive by any standard. Washington's position toward Japan is patronizing and condescending. We try to persuade the Japanese to accept more imports for their own good, as if they are unable to make such judgments on their own. At the same time, the Japanese response is equally inappropriate. By participating in such trade talks with the United States, the Japanese only encourage the misconception that they are willing and able to open their markets.

Japan's economy is closed to foreigners not because of some economic conspiracy against the rest of the world, but because of the closed nature of Japanese society. Honda Motor Co. sells nearly twice as many cars in the United States as it does at home, and its market share in Japan is actually shrinking. Dwarfed by the successful, well-established companies such as Toyota Motor Corp. and Nissan Motor Corp., Honda simply cannot compete with them in Japan. Yet in the U.S. market, Honda surpasses these other Japanese auto manufacturers by a comfortable margin.

An attempt to genuinely open the Japanese market would require fundamental, all-encompassing changes in Japan's social, political and economic systems. Such an endeavor is not within our proper jurisdiction or power, nor would it necessarily produce an outcome favorable to our aims.

It's time to stop the charade. Japan ought to say, gently but firmly, that it does not intend to run its economy in the manner we do. For our part, we need to accept that Japan is not going to change, and move on to a new approach to bilateral trade.

Rather than tying our hopes of solving the trade deficit to another country's decision to change its entire system--a highly unlikely possibility--we should formulate a trade policy based on things within U.S. direct jurisdiction and power.

If we are bothered by an excessive trade deficit, the United States can implement domestic measures to curb the flow of imports. If Japan's keiretsu structure bothers us, we can enforce our domestic antitrust laws to prevent its operation in the United States. Such an approach would be far more realistic and effective in tackling our trade deficit than our current trade policy and might prevent economic frictions with Japan from needlessly poisoning the rest of the relationship.

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