Japanese-American Economic Troubles: Lowering the Temperature

Lowering the Temperature I t is a time in JapaneseAmerican relations not only for frank talk, but also for a lowering of temperatures -if those two objectives are not incompatible. The close and mutually valued relationship between our two countries has been under unusual strain in recent months. Complex economic issues of great importance to both countries have become heated political topics, mobilizing organized special interests in both societies. Our trade negotiations have become more adversarial, and seem to have moved out of control of the negotiators, and into our respective national legislatures and the public press. Voices have at times become strident on both sides. In this overheated atmosphere, there are two levels of danger. The first is that we will fail to come to grips with the actual causes of our current frictions, and that our misunderstandings will therefore grow deeper, and our tensions will worsen. The second and even graver danger is that deeper tensions in our economic relations could do lasting damage to our broader political alliance, and to our trust and confidence in each other. This would be a tragic outcome for a mutually indispensable partnership which Mike Mansfield, U.S. ambassador to Japan, recently called “the most important bilateral relationship in the world-bar none.” How can we turn the heat down, and restore more calm and civility to our trade dialogue? One of the first things to be done is to try to reach clearer mutual agreement on what the real problems are, and their causes. Until we reach that level of common understanding, we can hardly be expected to reach agreement on the solutions. The trigger for our current tensions was, of course, the $16 billion U.S. deficit in our bilateral trade last year. That statistic, and the expectation that the trade gap will continue to grow this year, has become the symbol of a fundamental inequity in the Japanese-American economic relationship. On the American side, the inequity is also being described as an injustice, an This paper served as the basis for a speech presented at Harvard University, May 20, 1982. Saburo Okita,former Foreign Minister of Japan, is currently President of International University of Japan and Adviser to the Ministry of Foreign Affairs. Internafional Security, Fall 1982 (Vol. 7, No. 2) 0162-2889/82/010198-06$02.5010 01982 by the President and Fellows of Harvard College and of the Massachusetts Institute of Technology. 198 U.S.-Japun Economic Disputes I 199 unacceptable condition imposed on the United States by restrictiveJapanese trade policies. On the Japanese side, the bilateral trade gap is also recognized as too large, but for primarily political rather than economic reasons. Japanese are concerned that the political effect in the United States of so large a trade gap is not only damaging our overall relations, but is also creating mounting pressure for retaliatory American action. This concern is compounded because an American resort to protectionism would undoubtedly signal a worldwide retreat from the market principles of free trade. As Ezra Vogel, one of America’s leading experts on Japan, pointed out in The New York Times of March 9th, this would be disastrous ”for a nation so dependent on trade” as Japan. Actually, Vogel used the words “potentially suicidal,” implying Japan’s direct responsibility for provoking a new round of global protectionism. I would demur on that point. Since in the long run we would all share in the disaster-as we did in the 1930s-I would suggest that we all share the responsibility for avoiding, or precipitating, a collapse of the world free-trading system that has been so carefully built up in the last few decades. Japan could hardly be held solely accountable for a suicide pact entered into by its major trading partners. We Japanese are less alarmed about the Japanese-American trade gap per se, because we recognize that bilateral trade imbalances are the rule rather than the exception in the free trade system. In fact, it is doubtful that even those Americans who are most aroused by the Japanese-American trade gap really believe that all trade should be balanced on bilateral account. It is true that the...