WE are currently on the verge of a trade war with Japan. This conflict is the direct result of 40 years of failed trade policies and the inability or unwillingness of Japan to open up its domestic markets. Over the past decade, the United States merchandise trade deficit with Japan has ballooned to record proportions, with no relief in sight. It is now time to move beyond the failed "managed trade" negotiations of the past and push toward a new policy that will take advantage of the comparative economic strengths of both countries.
In 1987, then US Ambassador to Japan Mike Mansfield called for the establishment of a US-Japan free trade agreement to depoliticize trade issues and improve the economic relationship between two of the world's economic superpowers. This "bold" idea immediately captured the attention of businesses and politicians around the globe. Leaders in both countries called for studies on the advantages and disadvantages of free trade discussions.
Unfortunately, free trade momentum quickly evaporated into the fog of protectionist rhetoric and political one-upmanship. Congress rejected the concept of free and fair trade, preferring instead to wallow in the degenerative status quo.
Recent congressional trade legislation has continued to rely on confrontation and retaliation, as represented by the 1988 Omnibus Trade Act and the so-called Trade Expansion Act of 1992.
The future calls for a new vision of trade freedom. Domestic and global conditions that made US-Japan free trade negotiations somewhat tepid in the 1980s have now been dramatically transformed. Efforts to produce a multilateral trade agreement in Uruguay (as part of GATT) have largely failed, and global trade has begun a rapid devolution into regional trading blocs.
Europe, Asia, and the Americas have each developed a regional-exclusive trading relationship which, if unchecked, threatens to destroy international trading diversity and economic interdependence. Establishing permanent free trade with Japan is necessary to maintain our economic ties to one of the globe's strongest developing regions.
For the US, the primary benefit of free trade with Japan is unlimited access to a relatively untapped market of 124 million Japanese consumers. While Japan has the third largest economy in the world, Japanese private consumption ranks near the bottom in the industrialized world, according to a 1991 Organization for Economic Cooperation and Development (OECD) survey. In fact, Japan spends only 8 percent of its …