Slippery Slope to a Trade Wipeout; Divided, Japan's Establishment Drifts toward a Showdown

By Alter, Jonathan | Newsweek, June 5, 1995 | Go to article overview

Slippery Slope to a Trade Wipeout; Divided, Japan's Establishment Drifts toward a Showdown


Alter, Jonathan, Newsweek


I WENT SKIING IN BALMY TOKYO LAST WEEK--INDOORS. TO avoid throwing people out of work, a Japanese company that once built icebreakers adapted to market reversals by constructing a huge steel chute and making real powder snow inside; the subway takes you to the slope. It was surprisingly decent skiing, but even stranger than expected: chilly, windless and unnerving.

Sounds like U.S.-Japan relations lately. (Sorry, for Americans visiting Japan everything's a metaphor.) Instead of the predictable, almost comfortable, noise that usually accompanies trade disputes, the latest one over cars is disturbingly quiet and cold. American officials from tough-talking trade negotiator Mickey Kantor to the usually cautious striped-pants crowd at State have moved beyond irritated to plain fed up. Japan's currency has tripled in value against the dollar in the past decade, and the cost of Japan's imports is almost unchanged. As any Econ 101 student can tell you, that's impossible without widespread market rigging through cartels and regulation. For their part, Japanese officials, especially the younger ones, have decided the usual gaiatsu (foreign pressure) game is getting tired and insulting. With no cold war to buoy it, the U.S-Japan partnership may soon sink to sullen.

The Clinton administration deserves some points for cleverness. If the 100 percent tariff on high-end Japanese cars actually goes through, who will weep for dealers in Greenwich and Beverly Hills? American job loss will be minimal. Detroit is hardly blameless, but the United States simply had to take strong symbolic action to drive home that it has run out of patience with Japan's one-way trade strategy. Otherwise, newly strong Asian countries might think they could emulate the Japanese model. In fact, the Japanese way is neither fair nor helpful to the region, as more and more Asians themselves are recognizing. While Singapore's Senior Minister Lee Kuan Yew may not favor the auto-tariff threat, he weighed in last week with an important rebuke of Japan's "shortsighted" trade policy. This isn't World War Ill; the U.S-Japan security partnership remains solid. But it's finally crunch time on trade.

The timing, though, could not be worse. "It's a lose-lose situation," says Yukio Okamoto, a former Japanese Foreign Ministry official. Japan is appealing the tariff to the new World Trade Organization and will probably win there. The Europeans are siding with Japan, which is especially galling to Americans. "Our European friends are always willing to hold our coats while we get our nose bloodied," as Kantor tartly put it. But a Japanese victory at the WTO on cars would be Pyrrhic. Washington could lose faith in the new trade tribunal and under pressure from Congress start throwing its weight around independently. Then it's a slippery slope to a free-trade wipeout for the whole world.

Given that, Tokyo handicappers assume some kind of settlement will come soon. …

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