June 29, 1995
The Trade Deal with Japan
The deal with Japan is imperfect, but when President Clinton said yesterday that it met the standards he set out two years ago, he was right.
From the start, the president's strategy toward Japan rested on two ideas.
First, the administration thought there was no point in simply waiting for Japan to "open up," or "hollow out," or increase its appetite for foreign goods. Such changes may be underway in Japan, but they're not fast enough to affect trade problems. For at least 30 years, many Americans have believed that Japan was on the verge of dropping its pro-export policies, but so far they've waited in vain. Nearly a decade ago the Japanese government proposed the "Maekawa" plan, which was hailed in America as a dramatic step toward eliminating trade problems. But since then, Japan has piled up an additional trillion dollars in trade surpluses. The one thing it could not do, the Clinton administration believed, was wait some more.
The second Clinton idea was that the U.S. should not just ask for "fairer" competition in Japan; it should ask for higher sales. Such a request may sound outrageous, but it's based on a realistic view of power dynamics within Japan. A truly "open" Japanese market, in which everything went for the lowest price and the country ran like one big WalMart, would rupture millions of business and human relationships. For instance, one reason big Japanese companies so rarely lay off workers is that their protected home market gives them an economic cushion in hard times. A more open market would mean a more vulnerable workforce.
So rather than asking the impossible, a total change in this Japanese system, the U.S. negotiators asked for what matters to America: that is, conditions that will create larger sales for high-value American goods. And that, in its limited way, is what this deal may provide.
The U.S. government failed in one crucial objective, which was to get the Japanese government to guarantee the import plans. Japanese negotiators drew the line at that request. So in recent weeks the pressure was on Japanese companies to announce plans to buy more from foreign suppliers. The plans are in theory voluntary, and they project only modest increases in foreign sales. But Minister Hashimoto was standing there when Mickey Kantor ticked off the plans, and he knows perfectly well that the U.S. government will treat them as if they were real promises, and will be back with new complaints if they are not carried out.
One could argue that the Clinton administration, having gone this far, should have gone farther - no compromise; sanctions; a showdown at the World Trade Organization over Japan's chronic-surplus policies. But Bill Clinton never announced that as his goal. He said he would work for broadened world trade, through GATT and Nafta, and for "results-oriented" deals, like this one, with Japan. He has not solved the Japan problem for his country or his successors, but what he said he would do, he has now done.
Copyright © 1995, by James Fallows. All Rights Reserved.