Samurais No More

Jagdish N. Bhagwati

From Foreign Affairs, May/June 1994

Article preview: first 500 of 2,493 words total.

Summary:  The Clinton administration is unfairly manhandling Japan and abandoning free markets in favor of managed outcomes, undermining the global trading regime.

Jagdish N. Bhagwati is Arthur Lehman Professor of Economics at Columbia University and was the Economic Policy Advisor to the Director-General of the General Agreement on Tariffs and Trade. He is completing, with Gary Saxonhouse, The Jaundiced Eye: Perceptions of Japan in the World Economy.

The failure of the February 11 Hosokawa-Clinton summit in Washington to produce a trade agreement on U.S. terms was marked by theatrics on the American side. Deputy Treasury Secretary Roger Altman?s banter was typical. He declared, with the bluntness that Wall Street breeds, that the United States would wait "until hell freezes over" for the Japanese to accept U.S. demands. When Prime Minister Hosokawa finally said no to them, the American anger was palpable.

U.S. Trade Representative Mickey Kantor brought to center stage the Motorola cellular phones dispute, which the administration had readied to coincide with the summit by speeding up ongoing negotiations. Amenable to manipulation as "proof" of Japan?s perfidy, the dispute was also the one most likely to be settled at a low cost, financial and political, by the Hosokawa government to save U.S. face: a crumb thrown to the United States, it could be called a cake.

Indeed Japan ended the dispute by bribing Motorola with investment outlays while affirming the dispute?s uniqueness and reiterating the policy of saying no. The Clinton administration, predictably, performed a war dance, celebrating a victory in a skirmish as if it had won the war, attributing the Motorola settlement to American resolve and threats, particularly to the president?s revival in March of the "Super 301" weapon, which authorizes the administration to highlight countries it determines are trading unfairly and, if it chooses, to impose trade sanctions in retaliation.

BREAKING ITS OWN RULES

The Clinton administration, however, cannot conceal the reality that its policy is fatally flawed. The policy makes demands that are inconsistent with the very principles on which the United States has itself provided leadership in shaping the world trading system over half a century. As important, the policy fails to grasp the significant changes that make both the style and the substance of these demands unacceptable to the new Japan. American policy is thus both unworthy and unworkable.

The problems with that policy concern "quantities" and "process." The United States wants managed trade: specifically, it wants the Japanese government to accept numerical benchmarks and targets for increased imports in specific sectors. It is also pressing for one-way concessions from Japan in areas where the United States has judged Japan to be either closed to imports or in violation of treaty obligations, acting unilaterally instead of using impartial procedures to which Japan would also have recourse. In both respects, the United States has the double disadvantage of having been roundly condemned by other nations and of having not the remotest chance of acceptance by Japan.

Benchmarks are only a weasel word for targets (that is, quotas), and these import targets quickly turn into export protectionism: they work to guarantee for American firms a share of the foreign market just as conventional import protectionism gives firms a guaranteed share of the domestic market.

These targets will multiply because they are open to manipulation by domestic firms that seek assured export markets. When Japan unwisely accepted the Reagan administration?s demand for ...

End of preview: first 500 of 2,493 words total.