The Reagan administration's top two trade policy officials yesterday told Congress the United States suffers from "an unequal trading relationship" with Japan, and is fighting European and Canadian discrimination as well. But in demanding "equity," they said it would be a mistake to resort to bilateral sanctions against any country or bloc.
Secretary of Commerce Malcolm Baldrige and Trade Ambassador William Brock told the Joint Economic Committee they are confident the Japanese government under Prime Minister Zenko Suzuki has made a major new commitment to open up its markets to foreign goods, despite a disappointing first step taken last week when Tokyo dropped a number of non-tariff barriers.
Coincidentally, President Reagan reiterated "my administration's commitment to free trade" in his annual economic message to Congress yesterday.
Elaborating on that theme, the Council of Economic Advisers in its own report went out of its way to warn against pressures to retaliate against other countries' protectionist steps, or to subsidize U.S. exports.
The report said these pressures "reflect a troublesome 'neomercantilist' view" inconsistent with the administration's goal of "less, not more, government interference in the marketplace." And the CEA cautioned against becoming "unduly preoccupied" with deficits with any single country.
Both Brock and Baldrige admitted that American companies, despite great effort, had so far made little headway in penetrating the Japanese market, especially in high-technology items. Both endorsed the concept of "reciprocal treatment," which is gaining new attention in Congress as a way of enforcing "fairness" in international trade. Brock said that the U.S. trade deficit with Japan, $16 billion in 1981, could approach $25 billion this year.
Japan's recent lifting of 67 out of 99 non-tariff barriers is welcome, but of minimal significance, both officials said. They hinted, however, that Japan is prepared to take further actions that are more meaningful. "I am absolutely confident that we are going to get equity from the Japanese. I think we need each other badly," Brock said.
Baldrige added, "If we have to go at this problem with a sanction here and a sanction there, we'll still be negotiating with them in the year 2000. It's difficult for them to make the change. For the Japanese man in the street, it's difficult to accept that his country is no longer weak, and now the second-largest industrial power in the world."
As defined in a number of bills in Congress, "reciprocity" spells out a demand for equal access to the markets of trading partners. But the two administration officials carefully asserted that reciprocity does not mean a drift into protectionism.
"Some people have interpreted the recent emphasis on reciprocal market access as a movement of the United States away from the open market system," Brock told the JEC. "Nothing could be farther from the truth. Reciprocity for the United States means resisting entrenched and mounting protectionism abroad, and nudging our trading partners forward to a level of market openness more similar to our own."
Nonetheless, the fear that the "reciprocity" idea could open a Pandora's box was demonstrated in the demand by some members of the committee that the Reagan administration retaliate against Japan in an effort to cut the trade deficit. To the suggestion of Rep. Fred Richmond (D-N.Y.) that the United States "is being financially raped by Japan and doing nothing about it," Brock retorted:
"Please don't put me in the position of defending Japan. You're preaching to the choir today."
Richmond said he would introduce legislation to limit sales of Japanese "manufactured luxury goods" to 50 percent of their purchases here of commodities.
Sen. William V. Roth Jr. (R-Del.) said he would join with Sen. John C. Danforth (R-Mo.) and eight other senators who have sponsored the Reciprocal Trade and Investment Act of 1982. The bill would allow the president to take action against any country that denies substantially the equivalent commercial opportunities offered by the United States.
In an interview on Tuesday, Brock confessed that he found it "difficult to disagree with what Danforth and others hope to achieve. But I'm not sure it's the best approach.
"The bilateral problem we have with Japan is not a dollar problem," Brock said in the interview. "We lack an opportunity to compete in their markets. If they opened up their markets, we wouldn't have a right to complain about trade imbalances."
Baldrige appears to be more willing to use the congressional drive for reciprocity as leverage on Japan. He is especially concerned about American high-technology industries. For example, he noted that "in the market for a critical state-of-the-art semiconductor memory chip , the so-called 64K RAM, referred to as the 'petroleum of the 1980s,' Japanese producers have been able to gain control of 70 percent of the market.
"Prices have been slashed by Japanese competitors to the point where they are driving the U.S. out of the market," he said.