Japan's brake on car exports
In indicating its willingness to limit automobile exports to the United States for a third year beginning this April, Japan is displaying the kind of accommodation that can only benefit that nation in the long run - and world trade in general. Indeed, at the same time that the Japanese trade minister was saying that he favored a voluntary extension on car quotas, Japan was formally announcing that it would limit exports of videotape recorders to Europe for three years.
The two announcements come at just the right moment. Calls for protectionist trade legislation are now being increasingly heard in the US Congress - and supported by leading US presidential contenders including former Vice-President Walter Mondale. In fact it may take even more substantial efforts - on both sides - to ensure that the gates of world trade remain open:
* Japan should extend the voluntary quotas on cars to the US for a fourth year, an issue now being discussed in Tokyo with US Trade Representative Bill Brock. Japan has said that it will not accept the limitation for a fourth year now, although it might consider doing so at a later time. US carmakers argue that they need at least two years to rebuild sales after the current recession, a period, incidentally, in which Japan slightly increased its share of the US market despite the voluntary quotas. Such a request is not unreasonable given the fact that the US has been more open to Japanese cars than almost all major industrial nations. Japanese cars, for example, make up 23 percent of the US market. In Britain, Japan holds only about 11 percent of the market and even less in other European nations.
* Japan would also be wise to liberalize regulations that bar high-technology and service imports. To be sure, these are areas in which the US accounts for a substantial share of the world market. Yet it is a question of fairness, with the US allowing Japan almost a quarter market share in the area where Japan is dominant (cars) but Japan sharply restricting US products in areas where the US is out front (high technology and services.)
* The US, for its part, should remove those trade restrictions that inhibit its exports - or imports. These include laws preventing North Slope Alaskan oil from being exported; laws banning certain timber exports; dubious national security provisions - such as controls on horses exported by boat. There are also many restrictive laws aimed at imports, such as the Jones Act, which prohibits foreign ships from transporting goods between US coastal cities. As former presidential adviser Murray Weidenbaum notes, the US, like Japan, also has many nontariff barriers that inhibit trade or impose high costs on US businesses selling abroad.
Ensuring an expanding world trading system is essential to the vitality of all economies. Japan and the US can both do more in this direction.