Winning the Trade War with Japan


Washington. GI Joe comes back from the war feeling like a hero, only to find that some stay-at-home shirker has stolen his gal and his job. What the heck was he fighting for? When the Persian Gulf war is over, the whole country may sink into this kind of B-movie sulk when it looks around to discover that while we were liberating Kuwait, Japan was continuing its inexorable economic climb. That will surely generate renewed demands that we launch a few Patriots against incoming Japanese products.

Chrysler's Lee Iacocca, writing in The New York Times on February 10, says that although he actually stands for "the common-sense approach of managing trade in the country's self-interest," he no longer minds the "dirty label of protectionist." The inevitable fatuous comparison: "We protect our interests in the gulf -- what is so wrong with protecting our interests at home?" Anyway, demanding reciprocity from our trade partners, and retaliating if we don't get it, "doesn't undermine free trade, it defends free trade."

Mr. Iacocca (or whoever wrote the piece for him) thus fudges, like most protectionists, whether what he really wants is mutual disarmament or rearmament on our side for its own sake. Does he think trade restrictions are a necessary threat, to be acted upon with regret, or a positive good? "If we copied Japan's example," he writes, "we would revitalize our auto industry . . . by shutting out all foreign cars." At Mr. Iacocca's hectoring insistence, we tried protectionism (import quotas) to revitalize our auto industry in the 1980s. If the industry still needs to be revitalized, I guess it didn't work.

Free-trade purists (I'm one) believe that open borders are the best route to national prosperity no matter what policy other countries pursue. But even free-trade purists recognize that the other guy's trade barriers are harmful to us. (The debate is whether they're also harmful to him.) And free traders, though generally cocksure, have no pat answer to the "crowbar" argument: The only way to get the other guy to lower his trade barriers is to threaten our own. Trade war, like real war, is mutually disadvantageous but sometimes necessary to establish a principle when threats fail to deter. That's the argument.

The trouble with the crowbar theory is that it's too convenient for phonies like Lee Iacocca who really want trade barriers for their own sake. The "playing field" will never be "level" enough to satisfy them, and meanwhile our own protectionism harms us.

What would be nice is a way to punish foreign trade restrictions that doesn't punish us as well. It is sometimes suggested that we ought to link our defense of nations like Japan with better trade behavior. But whether we should continue subsidizing the defense of Europe and Japan is a question that ought to be decided on its own merits. Tying it to trade issues is just an excuse either to continue the subsidy or to continue our own self-damaging protectionism.

Whenever I climb aboard this mental merry-go-round, I get off again where I started: unilateral disarmament. End these tedious fights. Drop out of the GATT negotiations. Repeal the Super-301 trade retaliation laws. Stop worrying about what is and isn't "dumping." Allow American citizens to buy foreign goods and services without hindrance whether or not foreign countries extend their own citizens the same freedom. Yes, we will give up a sometimes useful stick for beating down foreign trade barriers. But we will get some mighty advantages, too.

* As consumers, we'll enjoy a higher standard of living as we enjoy the cheapest goods the world can offer. If the European Community wishes to pay its farmers to produce too much food and then dump the excess on us at bargain-basement prices, we'll chow down happily.

* As producers, too, we'll buy our inputs where they're cheapest, making us more competitive.

* We'll be the saviors of Africa, Eastern Europe, Latin America, developing economies everywhere. They, more than Japan, are punished by U.S. protectionist rules. Free access to the American market would mean far more to them than any conceivable amount of aid or development loans.

* It will put hundreds of expensive lobbyists and lawyers out of business. This includes lobbyists for American companies as well as for the Japanese. There will be nothing left for either side to lobby about. Now the huge cost of conducting trade disputes gets passed along to consumers of products both imported and domestic, no matter which side wins.

* It will set a wonderful example for that New World Order we keep hearing about. Ronald Reagan said America was a shining city on a hill. George Bush says America has to do some things in this world because no one else will.

The power of example may not be as great as the power of a threat, but it is not worthless. And when the threat involves something that will hurt you as well as the nation you're threatening, while the example is something you ought to do for your own good anyway, making an example of yourself ought to be especially convincing.

Michael Kinsley writes the TRB column for The New Republic.

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