A Failure of Bluster


Paris. -- Nothing fundamental was solved by last week's Japan-America trade deal. As virtually everyone has observed, it is an equivocal agreement meant chiefly to disguise major backdowns by the U.S., and minor ones by Japan. Mickey Kantor, on President Clinton's authority, marched down to the OK Corral -- and there cut a deal with Old Man Clanton.

In statements following the agreement Mr. Kantor and other U.S. officials did their best to ignore the fact that little in the deal is binding, and that the Japanese government refuses to acknowledge the numbers and quantified auto-trade forecasts offered by U.S. officials, saying these are "beyond the scope and responsibility of government."

What happened on Washington's side was the sudden and terrifying realization that Japan might not yield. The eminent Columbia University free-trade economist, Jagdish Bhagwati, told the Clinton administration a year ago (in Foreign Affairs) that its officials were wrong to believe that with Japan "nothing but bluster can succeed and that bluster cannot fail." It failed.

On Japan's side, the settlement was composed of some regulatory concessions, combined with equivocations, euphemism, the bantering about of numbers "beyond the scope and responsibility of government," and "voluntary plans" by Japanese auto companies to augment offshore production and buy more foreign parts for domestic vehicles.

The economic and political situations inside Japan are so murky and unsettled today that the approaching confrontation was as dangerous to the Japanese as to Americans. Change is taking place in Japanese government and industry, and the consequent uncertainties counseled a prudent course.

A generational change is under way, with younger people well acquainted with the West taking posts of influence. However, the current of opinion among the younger generation is by no means unanimously in favor of further accommodation to American demands.

A Ministry of Finance official and influential author, Eisuke Sakakibara, argues that Japan's is a unique, non-capitalist, market economy which protects all corporate stakeholders, not just stockholders. "Its economic efficiency may be even greater than that of a more purely capitalist country such as the United States," he writes (in a book called "Beyond Capitalism").

As Columbia's Professor Bhagwati wrote, the Clinton administration has wanted managed trade, but has formulated it in terms of "export protectionism," by which American companies, instead of being guaranteed the internal U.S. market by means of U.S. import restrictions, are instead to be guaranteed an identified share of Japan's market by means of bilateral government negotiations. Tokyo knows that as this happens, everyone else will want the same thing. This is why Wednesday's auto-company "voluntary plans" include Japanese concessions to Europe and to some Asian countries.

On the same day the agreement with Japan was reached, the New York Times offered an account of the ways by which the West European governments have held down their Japanese car imports (to 5 percent of the market in Italy, 4 percent in France, 11 percent in Germany, 12 percent in Britain -- Europe's main auto-manufacturing nations).

The Europeans have acted toward Japan in roughly the same way Japan acts toward others. They have forced the Japanese to accept limited market shares in order to have access to their markets at all. They have won from Japan the concession that all Japanese cars manufactured in Europe have 60 percent European content (heading toward 80 percent). They and the Japanese have come to understand one another.

The United States, however, is a country which takes principled stands on how the world should work. The fault in the Clinton administration's reasoning, when dealing with Japan, derives from this endemic American conviction of the universal validity of American principles, and need for them to be accepted by others. We may practice managed trade but we and everyone else have to call it a method for achieving free trade.

Washington has always found it hard to admit that while American ideas suit Americans, and our versions of democracy and capitalism work for us, there are other ways of running successful communities and economies, and Japan's is one of those. The Japanese's intransigent conviction that theirs indeed is a better way of doing things is what has driven Mr. Clinton's people to their recent extravagances.

In confrontations like this one, adjudication is the best way to go. The U.S. and the other industrial democracies have spent the last decade trying to get tariff reform and a World Trade Organization so that impartial international judgment would be available in trade disputes. Japan was prepared to go to the WTO in the present confrontation.

When adjudication is impossible, the subtle response is best, as the Europeans have demonstrated. The trouble with a shoot-out is that when the other side does not back down, you may find your feet colder and colder during that walk down to the OK Corral. You know that the good guys and the bad guys both can get shot dead.

William Pfaff is a syndicated columnist.

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