Trade Godzilla Meets King Klinton Kong

[Dave Farber <farber () central cis upenn edu>]

Date: Sat, 17 Jun 1995 11:02:37 +0900
To: farber () central cis upenn edu
From: sja () glocom ac jp (Stephen J. Anderson)


I would say that Clinton is highly likely to impose sanctions, and even
more likely to move forward because of infuriating moves on the part of the
Japanese side.  The combination of excuses and old defenses for running
huge trade surpluses and keeping domestic markets organized in cartels is
not being address by any Japanese in a public forum.   In private, some
Japanese business people think that change is needed, particularly in
reducing the stranglehold by the Ministry of Finance.


I think, however, that the most influential Japan watchers, and the younger
generation, are in agreement that change is needed.  Sanctions are the
first step, and President Bill Clinton will need to remain consistent in
the pressure at last being brought to bear on Japan.


David Friedman, an attorney in California and a former colleague from
doctorate work at MIT Political Science, writes:


 All of this boiled over in a California Chamber of Commerce meeting last
week, when American employees of Japanese firms--i.e. Toyota, Nissan,
etc.--tried to take the floor and launch into the "we can't afford
sanctions because the world will end" speech carefully prepared for them.
They were limited by the chair to a five minute talk, and then were met
with steady rebuttable  on the part of CEOs from other California
industries, including agriculture.  One owner of a large food processing
firm that sells millions to Japan went so far as to implore Californian
industries to "hang together" and not be torn apart by intersectoral
appeals from the Japan lobby.


He got a standing ovation.


Ron Bevacqua, economist for Merrill Lynch in Tokyo writes:


Many of you may already be familiar with Sakakibara Eisuke, MoFAs
chief negotiator on the insurance issue, the next head of MoFAs
International Finance Bureau and author of aBeyond Capitalism'
(1990), in which he argues that Japan is a non-capitalist market
economy, defined as one that maximizes production and employment
rather than consumption and return to investors.  (skip)


Sakakibara, it turns out, is no maverick.  I went to hear him speak this
week at a lunch sponsored by the American Chamber of Commerce,
and found that he, like his fellow bureaucrat/negotiators, has only one
goal:  defending JapanAs trade surpluses.  His basic argument is that
Japan is not an outlier and is no more different from the US than is
France; whereas all three countries enjoy market economies and
democracies, historical and cultural factors have led to differences in
how each establishes their democratic and economic institutions.


(skip)


Following the speech, Glen Fukushima said that Japan was indeed an
outlier with respect to the size of its trade surpluses and the lack of
foreign access to the Japanese market. As for the former, Sakakibara
appealed to the old savings/investment imbalance argument (how
convenient that neo-classical economics comes in handy when he
needs it to; even he said, "I don't believe in neo-classical economics,
but I believe the savings/investment theory of trade imbalances is
correct").  He explained away limited market access by saying it is a
cultural problem because Japanese companies "invest in human
relations" and "have long memories" (it alarmed me that the next day a
reporter from a US newspaper called to ask me if Japan was really
protectionist, or if it wasnAt all just culture...).


You could feel the outrage in the room.  There were a few more
questions and finally I couldn't help myself and asked him if he could
blame American businessmen for thinking that he and his colleagues
were more interested making excuses for Japan's trade surplus than in
bargaining in good faith to reduce it.  He responded by saying that
Japan is willing to discuss specific problems of market access, but that
the real problem is macroeconomic (the savings/investment theory
again) and that deficit countries have no business criticizing surplus
countries.


After the lunch, I spoke with a few business people and the mood was
almost universally in favor of sanctions.  After witnessing a
performance like this, I agree.


Stephen Anderson, research professor in Tokyo, adds:


This evidence leads me to believe a movement is afoot, watching Friedman,
Bevacqua, Glen Fukushima, and others.  There is no groundswell of backlash
from America, no matter how much the Japanese side tries to generate it,
that will stop this round of sanctions and more.  Even a WTO case that
loses for the US side will only be the first step in a much escalated set
of trade sanctions and overdue measures to make Japan buy foreign goods and
reduce trade imbalances.


Let me add one point:  FOREIGN goods do not mean just US goods.  The truly
untenable, and even hypocritical, part of the current Japanese position is
that the imbalances are with the entire world.  As Asia wakes up to the
Japanese position, and one only need to read the editorials of the Far
Eastern Economic Review to understand this awakening, I think that Japan
will have to take this medicine.  Integration for Japan means that the
current propaganda is wrong.  In time, Japanese such as Sakakibara, may be
taking a very different position if they wish to get cooperation from Asia,
as well as America.  Otherwise, perhaps linkage of trade with other US
policies will become a more attractive idea, and Japan can figure out how
to defend their sealanes against the Chinese on their own.