Japan and the U.S.

Press, 20 November 1987, Page 20

Japan and the U.S.

The visit of the United States Commerce Secretary, Mr William Verity, to Japan is likely to be a particularly bitter one if the comments made before the visit are any indication. Both Mr Verity and Mr Sadanori Yamanaka, a former Japanese Trade Minister and the present leader of the farm lobby in the governing Liberal Democratic Party, have made some very tough statements. If the two countries resort to deeds which reflect their words the result will be disastrous not only for the two countries, but for all international trade. The underlying United States argument is that Japan should take drastic measures to lower its trade surplus with the United States. The latest United States complaint is that after a dramatic fall in the value of the United States dollar against the yen, Japan’s exporters have failed to increase their prices but instead have trimmed their profit margins. The United States has been looking to the fall in the value of the dollar as one of the measures necessary to help correct the large trade deficit of the United States. A fall in the value of the dollar should have had two effects: to make American exports cheaper and therefore more competitive, and to increase the prices of goods imported into the United States. If American goods sold more in foreign markets and more at home, because they were cheaper, then fewer imported goods would be sold and the balance of payments would be improved. The United States Government apparently believes that Japan is interfering in the processes which should result from the lower value of the dollar. Such action would be seen as frustrating a United States trade recovery. Although Mr Yamanaka is not a member of the Government he is highly influential. Because he is not speaking for the Government he can express himself with rather less restraint. The tone of his remarks,

however, was almost hysterical. He referred, for instance, to Japan’s history of desperate measures, such as the kamikaze suicide bombers and added: “We may have to resort to extreme means if the United States bullies Japan like this.” He was referring to retaliatory trade measures which Japan might take. His complaint is that the United States had protested to the General Agreement on Tariffs and Trade about Japan’s import restrictions on farm products. He clearly fears devastation of Japanese farming if the Japanese Government gives in to the demands of the United States.

Mr Verity probably had a domestic audience in mind as well as a Japanese audience. The United States Administration has, for a long time, been trying to head off Congressional protectionist trade measures. If Mr Verity can sound tough enough against the Japanese it may persuade the Congress to delay trade protectionist moves, or moves which would entail trade action against Japan. However, both Mr Verity and Mr Yamanaka have made some specific threats. Mr Verity is the first United States Cabinet official to visit Japan since Mr Takeshita became Prime Minister. Mr Takeshita will have his first taste of American anger. If Mr Verity’s words are as forceful in Japan as they were in the United States before he left, they may make relations between the two countries more strident

New Zealand and Australia, whose Prime Ministers will confer during the next few days, have placed great faith on the inclusion of farm trade in the new round of trade talks under G.A.T.T. They both want to see several countries, especially Japan, the countries in the European Economic Community, and the United States itself, reduce farm subsidies. The significance of the comments fr«m Japan and the United States to those hopes is that any overthrow of a subsidies system is going to meet with fierce opposition.