As a first impression, the rumblings from Washington are worrying. In his State of the Union speech last week, President Bill Clinton indicated his readiness to mount an aggressive defense of the U.S. steel industry and singled out Japan as a prime offender among countries “dumping” steel in U.S. markets. To deliver on that threat, Mr. Clinton is threatening to revive “Super 301” authority with which he can punish countries that his administration decides are unfair traders. At the same time, the United States is involved in a nasty dispute with the European Union over the EU’s banana import regime. Trade officials, economists and Washington watchers warn that the slowdown in the U.S. economy that is projected for this year will increase pressures on the administration to go on the offensive on trade issues. But dire predictions of a return to the rancorous trade disputes of the past are overblown. If the U.S. exercises restraint and its chief trading partners –including Japan — show some leadership, we might even be able to put the world trade system on a firmer foundation than ever before.
The pressure on the U.S. administration is understandable. The U.S. trade deficit in the first 11 months of 1998 reached an all-time high of $153 billion, and it is projected to swell by another $50 billion when the December figures are announced. At the same time, Japan’s trade surplus with the world swelled 40 percent in 1998, to 13.9 trillion yen ($121.8 billion), and its surplus with the U.S. leaped 33.4 percent to 6.7 trillion yen, or $58.3 billion.
There are ready explanations for those figures. The U.S. economy continues to grow, and in the process it is sucking in imports. While America is chided for living beyond its means, more sober minds note that U.S. demand is one of the few drivers in the global economy. Japan, in contrast, lolls in the doldrums. Its bulging surplus is the result of a steep drop in demand for imports more than anything else.
Rhetoric aside, there are few indications that the U.S. is spoiling for a trade fight. In a speech Tuesday at the Foreign Correspondents Club of Japan, Deputy U.S. Trade Representative Richard Fisher went out of his way to downplay talk of frictions with Japan. Mr. Fisher repeated that the U.S. interest is in “a strong, prosperous Japanese economy.” At the same time, administration officials were testifying before the U.S. Congress on the need to resist the protectionist temptation at home. They are beginning a second offensive to secure “fast-track” authority for the president, suspended a few years ago, so that the U.S. can proceed with a new round of global trade negotiations. The pledge to defend sectors in the U.S. economy that are being harmed by “unfair trade” is part of the quid pro quo for congressional acquiescence to the renewal of fast track.
Japanese officials have expressed concern over a possible return to U.S. unilateralism, but overall the response has been muted — as well it should be. The talk of possible future disputes is designed not to fan the flames of trade frictions, but to head them off before they get out of control. For example, Mr. Fisher’s pointed comments about his inability to meet with Japanese officials to discuss insurance matters seems to have changed some schedules at the Finance Ministry. Commerce Secretary William Daley said the U.S. will not take action against Japan given December’s drop in Japanese steel exports to the U.S.
The key is focusing on the big picture. That means strengthening the international trade regime. U.S. officials have stressed that any action they take will be consistent with World Trade Organization rules and procedures. That is more than reassuring: It also provides momentum for the new round of global trade talks scheduled to begin in November. Given their range and scope, those talks promise to be difficult.
If they are to be successful, more states need to take the initiative. In particular, Japan must begin to lead. Few countries depend more on international trade, yet this country’s performance at recent multilateral negotiations has been shameful. Rather than pushing market-opening measures, the Japanese government has been on the defensive, doing its utmost to protect its inefficient, but politically powerful, domestic producers. The Japanese government’s complaints about U.S. unilateralism ring hollow when it declares a 1,000 percent tariff on rice imports. Claims that the move is legal — like U.S. claims that its measures are WTO-consistent — miss the point. If Japan wants to deflect criticism of its trading practices, it should take the lead in efforts to further liberalize the trade system. Recent tough talk from the U.S. could spur Japan to take this initiative.
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