Trade at Loggerheads
AFTER years of talking, the United States and Japan still haven't ironed out their differences over trade. In fact, they're headed toward an open rift, with Washington set to impose punitive tariffs on Japanese automobiles.
A dialogue between the world's two largest economies, each with a democratic system and a huge stake in free trade, ought to arrive at a more desirable destination. But the room for adjustment appears remarkably small at the moment. The Japanese won't budge from their rejection of ''voluntary'' plans for the purchase of more US-made auto parts, and the Americans won't budge from their insistence on such plans.
In the background are a number of economic and political calculations. Japan is still struggling to emerge from a recession that has hit its carmakers particularly hard. Tokyo says it won't further burden these companies by agreeing to plans that virtually mandate purchases from abroad. The Japanese also point out that sales of foreign cars and auto parts in their country have been steadily rising -- though not at a pace that impresses American officials.
During last week's dead-end talks, US Trade Representative Mickey Kantor referred to the growing market shares of European and US carmakers -- now in the 2 to 3 percent range -- with unveiled sarcasm. From the US perspective, the numbers tell all: Japan bought $3.5 billion in US automotive products last year, while the US consumed $40.3 billion in similar Japanese goods.
The US response, this time around, is sanctions with a bite: tariffs high enough to drive Japanese luxury cars out of the US market. The chances are good that the mere threat of such sanctions could restart negotiations and lead to Japanese concessions -- that's what the US is counting on.
If that doesn't happen, both Tokyo and Washington are expected to take the dispute to the World Trade Organization. That newly formed body is empowered to issue binding judgments in such matters. A Japan-US ruling would sharply test that power.
But if reason prevails in the days ahead, and leaders on both sides of the Pacific realize that a sound trade relationship is more important than tough political posturing, the dispute may not go that far. Japan unquestionably has to go farther to open its markets; the US, with its free-trade credo, should welcome an opportunity to lay down the tariff club.