U.S.-Japan trade gap to test Clinton Matching rhetoric, results to be tough

November 14, 1992|By John E. Woodruff | John E. Woodruff,Tokyo Bureau

TOKYO -- President-elect Bill Clinton carefully avoided Japan-bashing, but he had plenty to say about America's No. 1 Asian ally in his 13-month campaign for the White House.

"If Japanese markets were as open as ours, we'd do $10 billion worth of business in Japan and put 300,000 Americans to work," Mr. Clinton liked to say.

By the time he takes office in January, he may already be discovering how hard it can be for even a calculatedly moderate American president to make results match rhetoric in Japan-U.S. trade.

The chronic U.S. trade deficit with Japan -- for a decade the prime flash point in Tokyo-Washington relations -- went out of control again this year after nearly three years in remission.

For Mr. Clinton, the bad news is that he will take office at a time when that deficit is sure to soar any time the U.S. economy shows signs of life. For at least another year, the deficit will be driven by a force bigger than anything two governments can negotiate: The timing of the two countries' economic cycles.

Japan went into its worst slowdown since World War II more than a year after the United States entered its recession.

Today, Japan is at least six months from regaining its steam, meaning it would be that long before factories and consumers get back to spending, and importing, as usual.

The trade deficit is but one of the obstacles Mr. Clinton will face.

"I'm not sure it makes much difference which party has power in Washington," a U.S. official said here this week. "From any legal point of view, the Japanese economy is already amazingly open, almost no tariffs, only a handful of product restrictions and those in areas that don't add up to many dollars, like rice and leather goods.

"Japanese buy imported consumer goods fairly freely now and will buy still more with time," he added. "The industrial buyers, people who buy parts and machinery that Japanese factories use, they're the ones we have to break through now.

"For that, the trick is to get American companies worked into the Japanese companies' supply system. So you've got to find some way to force your foot in the door without making them so angry they stiff-arm you once you're in."

Other observers agree: Japan's cartel-like industrial combines are by far the biggest and most daunting drag on U.S. exports to Japan. Only if U.S. parts and components suppliers can become part of the Japanese manufacturing process, as foreign makers are in the United States, can negotiations be expected to make significant new headway against the trade deficit.

Although Mr. Clinton's campaign rhetoric has been all for free trade, he has qualified that sentiment. "But I believe in more trade on fair terms," he has said. "I'm tired of seeing our country being played for a patsy by other wealthy countries.

"If other nations refuse to play by our trade rules, we'll play by theirs," he said repeatedly.

To give that threat force, he called for reviving the 1988 "Super 301" trade-retaliation provisions, which expired in 1990 when President Bush threatened to veto any congressional renewal of the measure. The law required the administration to draft a list of "priority countries" and "priority trade barriers" every year and take retaliatory action against those trading partners if there was no progress in solving disputes.

Some Japanese officials have expressed alarm that the United States might now have a president who would not fight off similar legislation, as Ronald Reagan and George Bush did.

But Mr. Reagan got his own kinds of mileage out of protectionist threats in Congress. For eight years, he preached free trade and practiced managed trade.

In the name of keeping trade free by fighting off protectionist Democrats, his administration got the Japanese to agree to "voluntary limits" on car exports to the United States in 1982. Today, similar Reagan-era managed-trade agreements extend across a range of key products, including vital computer microchip technologies.

International trade organizations have begun to protest against these Reagan-era agreements. They say two-way, managed-trade agreements violate the spirit, and maybe the letter, of the General Agreement on Tariffs and Trade, which governs international commerce among its 108 member nations.

But the Japanese, for all their public insistence on free trade, have long shown signs of being delighted by the managed trade of the Reagan years. It is a way of life they have long practiced at home and understand far better than the unpredictability of more open free trade.

To achieve his goals, Mr. Clinton might well feel he needs the threat of something like the "Super 301" trade-retaliation law. But in practice, trade retaliation tends to be an unpredictable instrument. It has a way of rebounding to strike the wielder in unexpected places.

Even managed trade has been harder for Americans to manage than for Japanese.

Agreeing to the Reagan-era "voluntary" import restrictions, Japanese car makers adopted a two-pronged strategy in the 1980s:

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