Don't Pressure Japan

Though Bill Clinton has, as yet, no settled policy on trade, the signs are that he wants to enforce restrictions--and that he will be a lot more forceful than his relatively accommodating predecessor, George Bush. Where necessary, that will mean using coercion to demand better access to foreign markets for American exporters. And nowhere is such an approach more necessary, many of Clinton's advisers say, than in dealing with Japan--whose trade surplus with America is growing, and whose leaders are not to be trusted. To get results in Japan, the argument goes, toothless multilateral pacts are a waste of time. You have to be tough.

Clinton must abandon this thinking, and adopt instead an approach that is likely to advance America's interests. The best objection to "aggressive" trade policies is not that they may harm others (which they do) or that they undermine the multilateral process of trade liberalization that has served the world well for 40 years (which they also do); to emphasize such points can seem naive and unrealistic. The best objection is that such policies actually do the most harm, in the end, to the aggressor.

How can this be? How can it harm America's interests if Japan agrees, as it did in a recent deal on semiconductors, to expand America's share of the Japanese market? It is easy to see how a pact of that sort may damage Japan. If Japan simply removes trade barriers, its own producers may lose business. If the Japanese government compels importers to purchase American goods, then Japan's consumers may have to pay more, or make do with poorer quality goods. It is also easy to see why third parties, such as exporters in Europe or Asia, may suffer. But as long as the policy of demanding with menaces works--so long as American exports increase--how can America be the victim?

One answer is that America may suffer from Japanese retaliation, through trade policy or other venues. It is in America's economic and strategic interests, as well as in Japan's, to nurture the alliance between the two countries. If the Clinton administration's trade policy toward Japan is angry and complaining, something valuable is in danger.

But there is also a subtler answer. Openness to imports is not necessarily a burden that enfeebles an economy. If it were, then America--one of the most open economies in the world--would not be so rich, and the once-closed economies of Eastern Europe would not be so poor. The first aim of intelligent trade policy should not be to open foreign markets; more important is the goal of keeping one's own markets open. That way, domestic industries are obliged to compete, which is necessary if they are to innovate and seek greater efficiency.

By all means, a trade-policy "activist" might reply, but why should pressuring Japan to open its markets effectively close America's? The question is--one hates to say it--naive and unrealistic. The domestic pressure for protection is relentless. To keep it in check, governments need to be shrewd. They need to deny the enemy opportunities and arguments. The Clinton administration seems ready to supply both.

To achieve market-sharing deals, the Clinton team will have to threaten higher barriers to imports, as it already has. If that threat is to remain credible, from time to time it will have to be carried through--and there will be no dearth of voices accusing Clinton of cowardice if he later backs down. Merely by issuing the threat, the administration shows that it is willing to employ protectionist policies. And in the process, the American government denies itself its best defense: a cogent intellectual argument. For if there are circumstances in which it makes economic sense to grant greater protection to, say, the American car industry (and the threat takes that as its premise), the administration can no longer deploy the economic argument for free trade with conviction.

The U.S. trade deficit reflects a home-grown problem that can be solved with home-grown remedies. Americans buy more goods than they produce; the difference is imported from abroad. If Americans spent less and saved more, the trade deficit could diminish. Japan, which saves four times more than the U.S., consistently runs trade surpluses. Japan-bashing will not cure America's economic malaise. The remedy is to raise savings--most easily by cutting the Federal budget deficit--and to raise public and private investment.

In the past, Japan has bent to American pressure on trade, often in ways that have served the cause of managed, rather than open, markets. If, from now on, Japan politely says no to such arrangements, it will benefit not only itself but also America--despite Clinton's efforts on the contrary.