Two Economic Superpowers

March 07, 1994

Since President Clinton and Japanese Prime Minister Morihiro Hosokawa hit a brick wall on bilateral trade negotiations last month, there is reason to worry about a relationship that deteriorated into a shooting war half a century ago and is now threatened with economic warfare.

In Japan, officials have moved from chest-thumping bluster to ambiguous hints at the kind of accommodation Americans have learned to distrust. It is not enough.

The Clinton administration, exulting in the political payoff of talking tough, has now taken its Super 301 club out of the closet. This is protectionist legislation, asserting unilateral U.S. authority to impose sanctions on other countries in contravention to rules of the General Agreement on Tariffs and Trade. GATT's director called the U.S. action "misguided and dangerous." It may, however, head off even more destructive moves in Congress.

What is especially troubling about this trans-Pacific spat is that both governments believed the other side would blink. When neither did, an alliance founded on Cold War necessity continued its transformation into a brace of economic superpowers surveying one another at suspicious arms length. This may have been destined to happen sooner or later, but neither side seems to have a strategy for avoiding mutual disadvantage.

Consider this contradiction: Japan's current recession -- the worst in modern times -- reduces its appetite for American goods and services at the same time the U.S. recovery is spurring American imports from all over, including Japan. The two countries are at a stage in their business cycle least conducive to narrowing the horrendous trade deficit. Yet punitive U.S. action or pressure for excessive Japanese pump-priming could make this situation worse.

As economic superpowers, the United States and Japan have global obligations to see to it that the new reforms in the General Agreement on Tariffs and Trade work to liberalize world commerce. Yet failure is foreordained if their governments drift into economic hostilities.

The Congressional Research Service has estimated that $9 billion to $18 billion in the current $60 billion trade deficit with Japan can be traced directly to market-closing barriers. Here is a "numerical goal" for trade deficit reduction that might be mutually acceptable through a mix of careful stimulus in Japan and specific industry targeting by the United States. Precisely balanced trade is neither possible nor desirable.

The U.S. economy is once again demonstrating it is the best in the world. The hang-dog days of supposed Japanese supremacy are over, as the triumph of American-style high-definition television so aptly symbolizes. Because this country now leads from strength in its dealing with a demoralized, disoriented Japan, Mr. Clinton's highest policy goal should not be domestic political advantage but global well-being -- and stability.

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