Rhetoric From Clinton, Dole Won’t Fix Gaping Trade Deficit With Japan

When President Bush staggered home from a trade mission to Japan in January 1992, candidate Bill Clinton could barely conceal his contempt. “A bust . . . an embarrassment . . . an opportunity lost”--that was Clinton’s verdict on the Bush visit, now remembered mostly for the then-president’s collapse from illness at a state dinner.

When Clinton returned from his latest trip to Japan last month, he heard his own words reverberating at him. “A spectacular failure, a fiasco . . . a full retreat”--so did presumptive Republican presidential nominee Bob Dole assess Clinton’s Japan policy in a speech on the Senate floor last Monday.

Dole’s broadside marks the emergence of an unprecedented alignment in modern presidential politics. For the past quarter of a century, Democrats have positioned themselves as tougher on trade than Republicans--Clinton’s denunciations of Bush fit squarely in that tradition. Now, Dole is promising to be more hawkish in trade negotiations--particularly with Japan--than Clinton.

“A Dole administration,” the Kansas senator bristles, “will quickly declare an end to the Clinton trade policy of surrender and sign on the dotted line.”

Dole has struck this theme regularly since last summer, and upcoming events will provide him more opportunities to make his case. In late July, the administration faces a deadline on renewing an agreement that guarantees American manufacturers a fixed share of the Japanese semiconductor market; earlier that month, the administration must also decide whether to take action on a complaint from Eastman Kodak Co., which alleges that Fuji Film Co. and the Japanese government have conspired to suppress its sales there. On both issues Japan is taking a hard line. And Dole, aides say, is prepared to pounce on any sign of weakness from the administration.

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If Dole now echoes candidate Clinton on Japan, President Clinton at times sounds eerily reminiscent of Bush. Like the man he defeated, Clinton is now emphasizing the U.S. security relationship with Japan and accentuating the positive when he talks about trade.

The centerpiece of Clinton’s trip last month was the agreement he signed to maintain the presence of nearly 50,000 American troops in Japan and open the door for greater Japanese logistical support to American forces if a military crisis erupts in Asia. Both publicly and privately, trade received much less attention. White House aides said semiconductors, Kodak and other trade frictions came up only “at the very end” of Clinton’s private meeting with tough-talking Japanese Prime Minister Ryutaro Hashimoto. In public, Clinton pocketed the thorns and painted a rosy picture of progress in opening the Japanese market.

Clinton can legitimately claim some credit. The administration calculates that exports have increased 85% in products and services covered by the 21 trade agreements it has signed with Japan. Total exports to Japan have jumped by one-third since 1992, more than during Bush’s entire term. “In the most politically sensitive areas [of exports], there is a certain momentum that is now visible,” said Michael H. Armacost, the U.S. ambassador to Japan under Bush and author of an insightful new book on the relationship, “Friends or Rivals?”

But it’s premature for Clinton to declare victory. Many of the agreements the United States has reached, such as last summer’s auto deal, weren’t as ironclad as he hoped; the jury remains out on their ultimate impact. And despite the increase in American exports, a tide of Japanese imports has pushed the trade deficit even further into the red under Clinton--in 1995, the deficit was about $10 billion larger than when Bush left office.

A mismatch in the business cycles explains at least some of this deterioration: The strong U.S. economy has attracted Japanese imports, while the slowdown in Japan (that is only now lifting) has depressed American exports. But beneath these cyclical considerations lies the obdurate reality that Japan remains an economy tilted in many ways against foreigners. As Walter F. Mondale, the U.S. ambassador, told reporters during Clinton’s trip, “Japan continues to be too closed, over-regulated, [and] too resistant to market forces. And I think that will be true for a long time.”

Can the United States change this just by banging harder at the door? Clinton has been tougher in trade talks with Japan than Bush. Dole could be tougher yet. But there are reasons to wonder whether Dole could follow through on his threats--or bend Japan to his will if he does.

For one thing, Japanese leaders have become increasingly confident about simply saying no; Hashimoto, who rose to prominence by playing hardball in trade talks, proves that staring down Americans has become a good way to move up in Japanese politics.

Threatening Japan is always good politics in America, but fulfilling the threats is a dicier political proposition. American firms dependent on exports from Japan are leery of full-scale commercial war across the Pacific. Bruce Stokes, a senior fellow at the Council on Foreign Relations, notes that Dole has always been close to American agricultural interests that profit from exports to Asia. Would he risk their sales by slapping sanctions on Japanese imports?

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Even if Dole would be more inclined to use sanctions, the new dispute-settling mechanisms established in the 1994 global trade treaty make it much more difficult for any country to unilaterally impose penalties on another. Already, the Japanese are poised to pursue damages at the World Trade Organization if the United States seeks sanctions in Kodak’s complaint. “The [Japanese] view seems to be ‘make my day,’ ” says one well-connected U.S. businessperson in Tokyo.

Most important, security concerns limit any president’s freedom to risk a breach with Japan over trade. Though Clinton has placed more priority on our economic relations with Japan than his predecessors, tension across Asia (and the uproar in Japan over the rape of a young Japanese girl by American servicemen) have compelled him to shift his focus toward solidifying the security relationship--as last month’s summit demonstrated.

“Nothing could have been clearer than that we have slipped back toward a very conventional view of policy to Japan, which is to subordinate economic concerns to broader security concerns,” said Jeffrey E. Garten, dean of the Yale University School of Management and a former top Clinton administration trade official.

So long as North Korea glares at South Korea, and China remains an unpredictable, at times baleful, force, Dole would face the same pressure to moderate his economic demands on Japan. Already, some of Dole’s key national security advisors are openly hostile toward his tough economic line, which is driven largely by Robert Lighthizer, a brainy trade lawyer who is one of Dole’s closest confidants. “I don’t think we ought to beat up on the Japanese,” said one GOP senator influential with Dole, “because the overriding issue is the U.S. security interest in Asia.”

Rising exports notwithstanding, Dole is right that the huge U.S. trade deficit with Japan remains unacceptable. The issue is how to reduce it.

In the long run, the best hope remains a domestic political realignment in Japan that mobilizes consumers fed up with high prices, over-regulation and limited choices. But like most things in Japan, such a new political order won’t come quickly.

In the meantime, the United States may need to explore new strategies. America can’t abandon direct pressure on Japan (or stop leaning on its own companies to more creatively attack the market there). But Garten and Armacost both convincingly argue that the United States should rely more on multilateral negotiations--like the ongoing Asia Pacific Economic Cooperation organization talks--to pursue greater openness from Japan. That approach, Garten says, could allow the United States to enlist other Asian nations frustrated at the impediments to their own exports in Japan.

That’s not a foolproof strategy either. In previous disputes, most Asian nations have concluded that they would rather protect their own trade barriers than lower Japan’s. In fact, there is no silver bullet to solve the economic imbalance with Japan. As Armacost writes, opening Japan’s market “is pick-and-shovel work, and there is no prospect that we shall be able to leave the trenches any time soon.”

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That’s hardly a ringing campaign rallying cry. But it’s a useful corrective to Clinton’s overstated claims of victory in Japan and Dole’s overheated promises of a new offensive--arguments joined at the hip by their mutual implausibility.

The Washington Outlook column appears here every other Monday.

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Trade Troubles

Since President Clinton took office, exports to Japan have steadily increased. But the trade deficit has continued to get worse because U.S. imports from Japan have grown as well. Here’s a look at the trends in U.S.-Japanese trade for the past decade:

TOTAL MERCHANDISE TRADE BALANCE / U.S.-JAPAN

U.S. EXPORTS TO JAPAN

Source: Department of Commerce