The Carter administration opened the congressional battle for approval of a new international trade treaty yesterday with the promise it would not accept growing trade deficits with Japan.
Special Trade Representative Robert S. Strauss, in testimony before the Joint Economic Committee, said "we are finally at the point where we can see some improvement in our trade figures with Japan," citing a reduction in the November deficit to $674 million from the January-June average of over $1 billion.
But Sen. Lloyd Bentsen (D-Texas), chairman of the JEC, warned Strauss that not enough progress had been made, and that if Japan refuses to lower trade barriers, then I think that we should start looking very carefully at a surcharge or other barriers to their imports, and I think there are a lot of members of Congress who feel the same way."
Strauss said he shares Bentsen's concerns, and conceded that only limited progress had been made. But while Strauss clearly welcomed Congressional "heat" that he can relay to the Japanese, he indicated he was dubious about the efficiency of an import surcharge.
In an exchange with Sen. James McClure (R-Idaho), Strauss said that if a 40 percent increase in Japanese exchange rates had done little good in reducing the Japanese surplus, a 15 percent surcharge would also do little good.
Two members of a panel session that followed Strauss warned that it is simplistic to blame the large Japanese current account (trade and services) surplus solely on Japanese protectionism.
William D. Eberle, a former STR, noted that the U.S. share of world trade over the past decade has declined in many countries, including Japan, "reflecting a general erosion of the U.S. competitive position." He also cited the lack of initiative on the part of American businessmen, and Japan's need to diversify when it found the U.S. an unrealiable supplier, because of U.S. government policy. He mentioned U.S. abrogation of soybean contracts a few years ago and current restrictions on exports of Alaskan oil as examples.
Philip H. Trezise of the Brookings Institution, a former State Department official and long-time Japnese expert, said that the supposition that "some kind of broad anti-import conspiracy exists... seems to me to be hopelessly far-fetched it is what I call the Fu Manchu approach to attempting to understand the Orient."
Trezise said that the biggest factor in the swollen surplus has been the sluggish recovery from Japan's 1974-75 recession, which kept imports low and left "extra productive capacity for exports -- in shorts to generate a trade suplus." He sees signs now of a reduction in the surplus, with revival of domestic demand. Over the longer-run, he predicted Japan would have a sizable but smaller current account surplus, balanced by outflows of capital.
"In effect, japan will be financing its export surplus by loans and aid, as we (the U.S.) have done in the past," Trezise said.
Strauss said that the "greatest pay-off over the longer term" will be reduction in non-tariff barriers set up by Japan (and other nations) that will be reduced by the multilateral trade negotiations (MTN) which "are close to a final agreement."
He revealed that Japan had agreed to abide by provisions of four new codes dealing with government procurement, standards, safeguards, and customs valuation. As one example, Japan in the past has frequently agreed to restrain its exports to other markets, resulting in a greater volume of goods shipped to the U.S. The new code for the first time will bring "some discipline" over voluntary export resraints.
Strauss cited with satisfaction major increases he had negotiated in Japanese quotas of beef and citrus items, but when pressed by the committee for more, said: "Sure there shouldn't be any quotas. But you can't open that market over night. I never worked harder in my life for a few bushels of oranges."
On broader MTN issues, Strauss said that the prospective trade "package would open up "billions of dollars worth" of new export opportunities, $3 billion in agriculture alone.
He confirmed reports from Brussels yesterday that there are "snags" in tariff discussions with the Common Market "because some European countries think we have received more than we've given. But I don't agree. I learned a long time ago that 'there ain't nothin' for nothin'"
He conceded that textile tariff reductions demanded by Europe present a difficult prblem, and promised to "strike a balance" between protecting domestic production interests, and the anti-inflation benefits of higher imports.
Strauss also said that he had completed a bilateral textile trade agreement last week with Japan, satisfactory to U.S. manufacturing and labor interests, and that additional negotiations were being pursued with Hong Kong, Korea, and Taiwan, "and we will achieve the same results." He gave no details.