As our U.S. trade representative, Mickey Kantor, met in Los Angeles recently with his counterparts from our three biggest trading partners. He must have felt anything but at ease.
His administration is considering unilateral trade action in knowing violation of the international agreements and principles the ministers were meeting to enhance, and that issue hung like a foreboding cloud over those discussions.
The atmospherics at that meeting are an example of the tensions created by an administration at war with itself on trade policy, and the urgent need to separate long-term U.S. policy from short-term election year politics.
The Clinton administration says it will meet its self-imposed deadline of Sept. 30 to decide whether to threaten trade sanctions against Japan under what is known as Super 301 authority and, if reports are true, the threats will be against Japanese auto parts.
However, no unfair trade practice in auto parts in Japan has been identified. In fact, there have been repeated, private admissions by U.S. government officials that the auto parts “problem” is largely political, not substantive. If the U.S. were to impose unilateral sanctions, it would be in stark contradiction to its goal of expanding international trade through multinational agreements.
Unfortunately, the U.S. appears to be hurtling into the No-Man’s Land of the international trade outlaw for reasons more to do with domestic politics than international trade.
But the result may be more than U.S. negotiators are bargaining for. Invoking Super 301 procedures and imposing unilateral sanctions against Japan with respect to auto parts would be a flagrant violation of the General Agreement on Tariffs and Trade (GATT) and would repudiate the new dispute resolution framework the United States fought so hard to get as a part of the Uruguay Round Agreement-the implementation of which was the subject of the Los Angeles meeting. The action would be taken simply because the United States doesn’t like the balance of trade between the two countries and in spite of the failure of repeated, exhaustive attempts to document charges of unfair trade practices in autos and auto parts. A U.S. decision to act without evidence of wrongdoing would abandon 50 years of global trade consensus and fly in the face of America’s long-standing support for free trade in competitive world markets.
Unlawful threats to punish Japan for not buying enough auto parts simply won’t work and probably will backfire. Should the U.S. decide on Sept. 30 to move toward sanctions, Japan’s automakers will urge their country to “take whatever actions are appropriate” in response.
We may be on the brink of a trade confrontation like we haven’t seen since before the Depression.
To solve a “problem” that doesn’t exist, millions of American jobs would be put at risk. In Illinois, exports alone account for 6 percent of the economy and more than 300,000 jobs. The shock of an international disruption of trade would register as a statewide economic earthquake.
The irony is that so much already has been accomplished to increase U.S. sales to Japan in both autos and auto parts.
Largely as the result of an intensive and sustained industry-to-industry, company-to-company effort, Japanese purchases of U.S. auto parts have jumped more than 500 percent since 1986-from $2.49 billion to $15.5 billion. In just the last five years, the number of U.S. suppliers to Japanese automakers has grown more than fourfold, from about 300 to about 1,250. And U.S. automakers are watching their sales in Japan soar since the recent introduction of basic marketing techniques such as price cuts and offering cars that drive on the correct side of the road.
All this progress, and that potentially yet to come, would be blown away by the trade conflagration Kantor and his boss may be about to provide.
Sen. Bill Bradley (D-N.J.), one of President Clinton’s most reliable supporters, has called the current U.S. strategy with Japan “gratuitous brinkmanship” for the benefit of “a domestic constituency without regard to the long-term strategic interests of the country . . ..”
Perhaps the Los Angeles meeting and trade sessions with others scheduled between now and the end of September will serve not only as a primer on free trade for the administration, but also as instruction on the potential scale of the damage to the American economy that could be done if domestic politics are allowed to interfere in the complex world of international trade.
