It’s just as well. Clinton’s negotiators are obsessed with Japan’s ever-expanding trade surplus-but they still don’t seem sure what to say nor how to say it. To its credit, the American economic team does have the description of “the Japan problem” down cold. The case, as described in a stinging speech last week by Under Secretary for International Affairs Lawrence Summers to an audience of high-ranking Japanese businessmen in Tokyo: manufactured imports (as a percent of the total economy) are well below levels everywhere else in the developed world; so, too, are levels of foreign direct investment. Japan’s trade surplus has rocketed back to levels that are well above that of anyone else’s. And to the argument typically presented in defense of Japan-that total imports of all goods are way up over where they were even five years ago-Summers replied that they still are not as high as they should be. Japan has never made the structural adjustments to lower-cost imports that an open economy quite naturally-if somewhat fitfully–makes. “Japan,” Summers said, “is today a larger, rather than fundamentally altered, version of its former self.”
So the question is, what to do about it? Mickey Kantor, Clinton’s trade representative, has been practicing what one colleague calls “in-your-face diplomacy,” demanding loudly and publicly that Tokyo agree to numerical targets for all sorts of foreign imports, as well as fixed targets for lowering the trade surplus by certain amounts in a rigid time frame. Aside from making the Japanese even more defensive, the public threats imply that there will be consequences: do it, or else.
Or else…what? Here, as always in trade relations with Japan, lies the rub. Among trade hawks the increasingly popular answer is: tariffs on a selected range of Japanese exports to America. In fact, behind Japan’s fierce resistance to “managed trade” is the suspicion that sanctions lurk behind a failure to hit each and every import target. Tariffs do hurt American consumers, even though they could help to reduce the U.S. budget deficit. But there is very little else, in real terms, that Clinton can do if moral suasion doesn’t work. Still, sources familiar with the White House’s trade “strategy” say the team has given sanctions little consideration. That means, in all likelihood, that it’s given only cursory thought to what the consequences would be on other aspects of the relationship with Japan, not to mention the ripple effects on other trading partners throughout Asia.
At some point, the desultory history of America’s trade relations with Tokyo suggests, sanctions may very well be required to deliver a message to Japan: its position as an outsider in the international economic system can’t be tolerated anymore. As Clinton will discover, if not on this trip to Tokyo then certainly on his next, if his policy is just talk, the Japanese will play “aggressive defense” forever. They would also likely stonewall him on every other issue that might come up that’s not to Tokyo’s liking (for example, Japanese aid to Russia). The Japanese would, in short, conclude that Bill Clinton just isn’t serious, and they may turn out to be right.
