Pragmatism on Trade
AFTER a year of frustration in trying to open Japanese markets to United States autos, auto parts, medical and telecommunications equipment, and insurance, the president's trade team is shifting its approach.
Late last month Washington and Tokyo agreed to revised ground rules for negotiating more-detailed access agreements in the five industries. Among other provisions, the US dropped its demand for specific numerical targets; Japan dropped its opposition to using various indicators to determine how open its markets are. This week, US Trade Representative Mickey Kantor said that the administration now is willing to negotiate agreements on each sector individually, rather than waiting for a package deal.
The shift is welcome, but it didn't have to take this long. US negotiators felt they could cut some individual agreements in February, but the White House instead suspended talks. It has learned that being hard-nosed with Japan doesn't pay, particularly when the government - the third in Tokyo in a year - is weak.
In any case, both sides stand to gain from the change.
For Japan, each agreement could relieve pressure from the US at a time when the strongest tool Washington has is the international currency market. But using currency values to affect trade balances is difficult to do in a way that doesn't threaten Japan's weak recovery. An expanding economy meets its needs in part with imports - which also helps explain why the US trade deficit with Japan has widened to some $60 billion. In a forecast released June 7, the Organization for Economic Cooperation and Development expects Japan's economic growth rate to rise from 0.1 percent last year and 0.8 percent this year to 2.7 percent in 1995 - not spectacular, but headed in the right direction. The US economy's growth rates for the same periods are 3 percent, 4 percent, and 3 percent respectively. Japan's recovery, if sustained, may do more to improve the immediate trade picture than would merely focusing on access.
For the US, the White House could claim some success in opening Japanese markets, with an effect on jobs that could be felt in time for the 1996 elections. The new approach also would give the administration the political breathing room domestically to focus on supporting Japan's efforts at political and economic reform.