US-Japan trade ties reaching impasse
US trade relations with Japan are coming to the boiling point, a variety of events indicate. Calls for retaliatory action are growing in Congress as a result of Japan's decision this week to boost auto exports to the United States by 24.3 percent. Another irritant is slow progress in ongoing telecommunications trade talks between the two nations that face an April 1 deadline.
The latest sign of the growing trade tension came Thursday when the Senate passed 92 to 0 a nonbinding resolution urging the President to take retaliatory action if Japan refuses to open its markets further to US goods.
The surging US trade deficit is fanning the flames of resentment. The US trade gap with Japan nearly doubled in 1984 to $37 billion out of a worldwide US deficit of $123.3 billion. Both the overall US trade deficit and the deficit with Japan widened in February from already lofty levels in January, the government said Thursday.
Retaliatory action against Japan would involve major costs for US consumers, notes David Wyss, vice-president at Data Resources Inc. The price of retribution could include higher prices for imported goods, upward pressure on the price of competing domestic products, and the possibility that other nations would react by chopping purchases of US made items. Such a cutback in US exports would boost unemployment in exporting industries like farming.
But because the US is currently buying vastly more overseas than it is selling, retaliatory strikes against the US would be more difficult than usual, Mr. Wyss says. And the threat of retaliation may be needed to make Japan bargain more seriously, he says.
A falling dollar could eventually lessen some of the friction between the US and Japan by lowering the price of goods the US is trying to sell in Japan. Such a drop would make Japanese goods more expensive in the US. The dollar fell for the third straight day Thursday against a variety of currencies including the yen as traders worried about slower US economic growth, higher US inflation, and the health of the US banking system.
Signs of increasing tension in relations between the two ecnomic superpowers include:
A Senate vote expected Thursday on a resolution that attacks Japanese trade practices.
The nonbinding measure was passed unanimously Wednesday by the Senate Finance Committee. It urges the President to take steps to limit Japanese imports unless Japan quickly opens up its domestic market to US products enough to compensate for an expected $4 billion increase in Japanese car shipments to the US.
``I hate to think that's what we are coming to -- an eye for an eye,'' said committee chairman Bob Packwood (R) of Oregon. ``But that's maybe the only language that's understood.''
The measure, sponsored by Sen. John Danforth (R) of Missouri, came in the wake of news leaks Wednesday indicating that Japan's Trade Ministry would extend existing quotas on auto shipments to the US that had been due to expire March 31. On Thursday Japanese Trade Minister Keijiro Murata confirmed the report.
The new plan would boost the allowable level of Japanese auto exports to the US by 24.3 percent, to 2.3 million units a year.
White House officials Wednesday indicated displeasure with the move. Last month Mr. Reagan announced he would not seek an extension of the quotas. A senior administration official said the contemplated level of exports represent the ``virtual capacity'' of what Japanese firms could produce to export. What Japanese officials say is restraint ``would not be any restraint at all,'' the senior US official said.
A flurry of other anti-Japan legislation is being introduced in Congress where anti-Japanese feeling appears to be running at a very high level.
For example, Sen. John Heinz (R) of Pennsylvania Thursday planned to introduce a bill to impose a 20 percent surcharge on all Japanese imports for a three-year period.
The Heinz measure comes on the heels of bill introduced last week by a well-known free-trade advocate, Sen. John Chaffee (R) of Rhode Island. The Chaffee bill would bar Japanese telecommunications products from the US until Japan opens its doors to similar items made in the US.
The telecommunications issue is expected to grow even more contentious in the near future. Japan faces an April 1 deadline for issuing regulations keyed to the denationalization of Nippon Telephone & Telegraph, the Japan's phone company. The soon-to-be-published rules establish the standards that US telecommunications products will have to meet to be sold in Japan. Despite highly competitive US products, Japan runs a nearly $2 billion telecommunications surplus with the US.