May 23, 1995
by James Fallows
First let me declare my bias. After reporting on Japan for nearly ten years, I'm convinced that its economic structure is so resistant to foreign products that extraordinary steps, like those the Clinton administration is taking, are the only way to open it up.
Bear that bias in mind, as I offer my guide to the issues that really matter in today's trade dispute and those that are interesting side shows.
One side show, although it sounds cruel to say so, is the fate of Lexus dealers. In human terms what is about to happen to them is unfair and sad. But as with other groups who have lost jobs because policies changed--loggers, fishermen, defense contractors when the Cold War ended--the fact that the dealers suffer does not by itself mean the policy is wrong.
A second distraction is the repeated claim by Japanese officials that they are shocked, just shocked, that the U.S. government would dare interfere with trade. These Japanese know, as do Europeans and others, that the main example of government-managed trade has been the economy of Japan. When you hear this argument you should smile and say, Nice try!
The two important issues in this fight involve the clash of idealistic theories with hard realities.
One concerns the World Trade Organization. The theory is that this expert, neutral body can resolve economic disputes and make them go away. The reality, as opponents of the WTO have long pointed out, is that major countries, on major issues, will disregard the rulings of the WTO. The WTO's potential power is like that of the United Nations, which has never forced the U.S. or China to give ground on a major matter and defines success as winning control of medium-scale issues. The car dispute will show whether the WTO can survive to handle medium problems or whether it will be broken trying to contain this major trade conflict.
The other big issue involves the military relation between the United States and Japan. Here there is one great, transcendent theory, which is that no matter how ugly economic conflicts between the two countries may become, they will never have any effect on America's promise to defend Japan. Both governments have espoused this theory for forty years, but the reality is that in the long run, without a common enemy, economic conflict will drive any alliance apart. Japan will eventually have to choose which it values more: its export structure, or its military tie to America, since in the long run it can't have both.
So spare a thought for the plight of the Lexus dealers, but please give extra thought to these bigger questions.
Copyright © 1995, by James Fallows. All Rights Reserved.