Every spring, the American Chamber of Commerce in Japan sends a delegation to Washington, D.C. to meet with senior U.S. administration officials and key members of Congress to discuss issues of concern to the U.S. business community in Japan. Participating in the ACCJ visit last month for the seventh consecutive year (nine times since 1991) provided me an excellent opportunity to reflect on the continuities and changes — what I call the “Three Phases” — in the U.S.-Japan relationship since the inauguration of the administration of U.S. President Clinton in January 1993.
The administration came into office giving high priority to economic issues, as reflected in the 1992 campaign slogan, “It’s the economy, stupid!” The view in the United States then was that Japan was a formidable economic rival that persisted in exporting to far more than it imported from the U.S.
With this as a backdrop, phase one of the administration’s policy toward Japan understandably focused on market-opening trade negotiations. This began with Clinton’s first postinauguration trip to Japan in July 1993 for the G7 Tokyo Summit, when he met with then-Prime Minister Kiichi Miyazawa to conclude the “Framework Agreement.” The Feb. 11, 1994 meeting between Clinton and then-Prime Minister Morihiro Hosokawa ended in failure but attracted much media attention as the “first time in postwar history that a Japanese prime minister said ‘No!’ to America.” Phase one effectively came to an end on June 28, 1995 with the bilateral settlement in Geneva on autos and auto parts.
Although numerous bilateral trade agreements were concluded, and although the administration’s intent to open Japan’s markets was genuine, the results were far from satisfactory. This stemmed in part from the absence of a consistent strategy and an unfortunate tendency by the administration to threaten Japan loudly and repeatedly with sanctions, but to not take any action that would induce Japan to open its markets. The outcome was that the administration got the worst of two worlds. On the one hand, criticism from Japan and its supporters that the U.S., contrary to free trade principles, was pressing Japan to submit to “managed trade,” while substantively failing to secure Japanese commitments to greater imports. Many of these negotiations and ensuing agreements have been analyzed and evaluated in the ACCJ publication “Making Trade Talks Work.”
Phase two of the administration’s Japan policy — focusing on the bilateral military security relationship — went into high gear in 1995. This emerged as a result of two sets of factors. The economic factors were: (1) the U.S. economy was showing strong signs of recovery, whereas the Japanese economy was suffering from the aftermath of the bursting of the bubble, reducing the U.S. fear of Japan as a “rival”; (2) the Japanese slowdown, coupled with the promise of the “Big Emerging Markets,” shifted U.S. attention in Asia away from Japan as an export market to China, India, Indonesia and South Korea; (3) the Japanese trade surplus with the U.S. was starting to decline; and (4) the conclusion of numerous trade agreements with Japan gave the impression that most of the trade problems with Japan had been addressed, as touted by the administration during the 1996 election campaign.
The security factors that led to phase two were: (1) U.S. concerns regarding North Korean nuclear development, which had heightened tensions almost to the point of military conflict between the U.S. and North Korea in the spring of 1994; (2) the incident in September 1995 in which three U.S. servicemen were accused of raping a 12-year-old Okinawan girl, igniting widespread Japanese opposition to U.S. military presence in Japan; and (3) the rising tensions between China and Taiwan in the spring of 1996.
Thus, when Clinton visited Japan for the second time as president in April 1996, most of the attention was focused on the agreement he reached with then-Prime Minister Ryutaro Hashimoto to review and update the U.S.-Japan Security Treaty Defense Guidelines of 1978. This exercise was meant to strengthen bilateral defense cooperation and to clarify and secure Japan’s commitments on what it could do to support the U.S. in the event of a military conflict in the region.
Phase three of the administration’s Japan policy began in late 1997, in the wake of the Asian financial crisis precipitated by the collapse of the Thai baht in July. From late 1997 through most of 1999, the administration’s focus on Japan was to urge tax cuts, public spending, and reducing nonperforming loans in the banking sector so that the Japanese economy could revive and perform the role of a “locomotive” to help the countries of Asia recover from the financial crisis. Thus, when Clinton visited Japan in November 1998 on his third visit, his main message was to encourage Japan to stimulate its economy and fulfill its role contributing to world economic stability and growth.
In 1998, U.S. concern about the Japanese economy was so intense that some administration officials genuinely believed that Japan was on the verge of a “meltdown” that would threaten the health of the entire world economic system. But as the Japanese economy since 1999 has slowly but steadily moved toward recovery, the administration’s concern has broadened from its focus on macroeconomic issues to return to structural issues including deregulation. But this focus on deregulation appears to be motivated as much by the desire to see it contribute to restoring Japan’s macroeconomic growth as to promote market access for U.S. companies.
Last month’s trip to Washington, D.C. left me with the impression that, this being a presidential election year in the last year of a two-term administration, it is a year of “tying up loose ends” with Japan. This includes ensuring the monitoring and implementation of trade agreements, resolving such security issues as renewing host nation support for the U.S. military in Japan, and urging Japan to take further steps to revive its economy. The G8 economic summit in Okinawa this July provides the final action-forcing event this year to try to address some of these issues. After the summit, the U.S. presidential election is likely to put serious bilateral initiatives in abeyance until the new U.S. administration takes office in January 2001.
One can only hope that the new administration will formulate a clear, consistent and comprehensive policy toward Japan. What the U.S. needs is a policy toward Japan in the post-Cold War world that Republicans and Democrats have yet to achieve — an approach that is at once strategic, proactive, well-articulated, results-oriented and firmly grounded in an understanding of the dynamics of domestic changes in Japan that are certain to affect profoundly the security, political, and economic posture of the world’s second-most powerful economy.