The roller-coaster economic relationship between the United States and Japan was plummeting downward at a rate that threatened to derail trade between the two countries. Now, U.S. trade representative Robert Strauss has reached an agreement that could prevent drastic congressional retaliation.
But members of Congress won't be easily placated. They have been in a simmering rage over the past failure of Japanese government officials and business leaders to take steps to correct the gross trade imbalance that saw the U.S. economy take an $8.5 billion beating last year. This was the difference between what Americans bought from Japan and sold back to the Japanese.
The imbalance was brought on by cheaper Japanese labor costs and government subsidies. This is pushing down the value of the dollar internationally; it is also putting American firms out of business and American workers out of work. One industry after another has been forced by Japanese competition to cut back production, thus adding to our 6.8 million unemployed and our $27 billion trade deficit.
The bitter irony is that the American taxpayers helped to build up the industries that are taking our markets away. After World War II, we displayed a generosity unequaled by any other people in history. We were concerned neither with revenge nor with with spoils; our concern was to get the world going again. We spent billions to help feed the world's hungry people and rebuild the free world's war-wrecked industries. Now our good deeds are coming back to haunt us.
Our income-tax payments not only helped finance our foreign competitors but provided them with more advanced equipment than our own. Though the AID agency has been perhaps purposely vague about the number of plants it has built abroad, a reported $5 billion of our tax money went to build or expand 179 foreign steel mills. This American generosity has helped to reduce our share of the world's stell market from 48 per-cent in 1950 to about 17 per cent today.
We are actually importing eight million tons of Japanese steel annually at a time Youngstown Sheet and Tube is closing its Youngstown mill at the cost of 5,000 jobs and Bethlehem Steel is shutting down an Ontario iron mine whose 275 Canadian workers will be idle. U.S. Steel also plans to close its Youngstown mills.
Especially noteworthy is the plight of the U.S. CB radio industry at a time when sales to consumers are booming. Americans buy 95 per cents of all CB equipment produced in the world. Yet in this country, employment in CB factories fell by 56 per cent last year and sales sagged off an alarming 38 per cent. Industry experts traced this directly to Japanese imports, which gobbled up 73 per cent of the U.S. market. And here's the topper: CB radios are banned in Japan.
For the textile industry, the Japanese competition has been disastrous. No one seems able to say exactly how many rival mills Uncle Sam has built around the world. But one official has admitted to us: "In our efforts to revitalize Japan as a bulwark against communism, we participated technically, financially and otherwise in creating a Japanese textile industry that [has threatened] our own with ruin."
Yet across the Pacific, U.S. products have been excluded by deliberate red tape and by the political power of Japan's farmers. Even American goods that get into Japan are exorbitantly expensive. A U.S. trade official was startled during a recent stay in Tokyo to find a small American melon at a market was priced at $12.50. U.S. beef is unheard of in Japan.
It remains to be seen whether the new trade agreement will head off congressional action. For every instance of Japanese trade hurting a U.S. firm, House Trade Chairman Charles Vanik (D-Ohio) says "a seed of resentment is planted" in Congress. He cites some ominous arithmetic in the House: More than 200 House members are concerned about damageto the textile industry; another 130 are protective of the steel firms; 42 would come to the defense of electronics manufacturers; another 20 would take action on behalf of such products as shoes and tools.
Vanik has warned, therefore, that the House "is dreadfully close to a majority that could halt trade [with Japan]." Several leading Senate and House members recently served notice upon Japan's trade negotiator, Nobuhiko Ushiba: "Help solve the trade imbalance or risk serious economic retaliation."
The structure of a protectionist block is evident in the House chamber. Rep. John Dent (D-Pa.) is plugging legislation to limit foreign imports to 10 per cent of the actual total consumption of the product within the United States. ReP. James Mann (D-S.C.) is accumulating broad support for a resolution that would exempt U.S. textile products as a topic for trade discussions with Japan at Geneva and bar any reduction of customs duties on rival textiles from abroad. Rep. Charles Carney (D-Ohio) is assembling a working group of congressmen from steel producing districts' to protect U.S. steelmakers.
In the Senate, one trade expert confided: "If someone were to lead a (protectionist) march, he'd find some soldiers to follow." No such leader has yet emerged on the Senate side. But Ohio's two Democratic senators, John Glenn and Howard Metzenbaum, are sponsoring trade legislation with a protectionist tinge.
The Toyko agreement came in the nick time. It could prevent the trade situation with Japan from worsening.