Tokyo’s markets have, slowly but surely, become more open over the past decade. In fact, some American companies think that Washington’s interference isn’t necessary anymore when it comes to doing business in Japan. But after Clinton’s remark last month, the new administration’s rhetoric provoked a chorus of angry questions in Tokyo: Did the new president’s stable of “policy wonks” have no inkling about the complexity of U.S.-Japan trade relations? And didn’t Clinton understand how hard it was going to be to undo the chronic trade imbalance-heading toward $50 billion again-between the two countries?
Good questions. But last week’s summit didn’t do much to clarify them. Clinton, for his part, was true to his word. He pressed Japan to stimulate its dormant economy (and thus purchase more U.S. goods), despite the fact that Tokyo had, earlier in the week, announced a plan worth more than $100 billion to pump up Japanese consumption. U.S. officials also made it clear after the meeting that that wouldn’t necessarily be enough. Washington will likely seek additional Japanese purchases of U.S. goods in specific industries like auto parts and electronics. Miyazawa said that Japan would increase access for U.S. goods, but added, “This cannot be realized under managed trade or under the threat of unilateralism.” The standoff left Tokyo officials worrying privately that a de facto era of “managed trade” between the United States and Japan had arrived.
Managed trade means a focus on outcomes rather than rules. In other words, the United States will now be less concerned with whether the Japanese are complying with international trade law, and more concerned with how much they’re actually buying. If the U.S. computer industry is selling lots of hardware everywhere else in the world (as it is) but still has a relatively small share in Japan (as it does), the United States wouldn’t want explanations as to why; it would just want more sales. This is the approach that the United States took in a computer-chip pact when both sides agreed that 20 percent was a reasonable target for foreign penetration into Japan’s chip market. With the United States muttering late last year about possible sanctions if Japan didn’t meet that goal, Tokyo announced in March that foreign market share had soared from around 16 percent to more than 20 percent in one quarter.
That eleventh-hour boom has prompted some administration officials to see the chip deal as a potential model for the future. In their rush to embrace the chip pact, though, some Clintonites have left the Japanese-and many American companieswith the distinct impression that they are a bit out of date when it comes to the allegedly “closed” Japanese market. Clinton’s rhetoric aside, many unglamorous U.S. manufacturers are actually doing just fine in Japan-and should be aided further by the continuing drop in the dollar’s value against the yen, which makes American goods more competitive in Japan.
The fact is, Tokyo isn’t the terrible customer it used to be: while Japan’s imports of U.S. grain, coal and soybeans are flat, it has developed a large appetite for advanced American merchandise. Last year Japan imported $3.8 billion worth of U.S. computers and electronic equipment, representing a 48 percent increase in five years. American shipments of airplanes and heavy machinery have risen sharply. TRW’s autoparts division, for example, was increasing its sales to Japan even before the Bush administration decided to make auto parts a trade issue during the visit to Tokyo last year. Even a company like American Standard, maker of toilet bowls and bathtubs, has grown “slowly but steadily” for 10 years, says Eve Gordon, the company’s Japan manager. “There’s not a whole lot the government could do to help us here,” Gordon says.
Some industries, to be sure, may still need some government assistance. But many others do not. Whether the politicians and bureaucrats in Washington know enough to make the right choices is another question. What Kiichi Miyazawa knows now, however, is that right or wrong, he is going to have to deal with those choices.
