In dealing with Japan, a two-term presidency comes in handy. For during the first term, an administration becomes exposed to the tricks, dodges, feints, delays and other bits of flimflam practiced by Tokyo in trade negotiations.
During the second term . . . well, look what the Reagan administration has just done. In a sharp break with the past, it is asking the Japanese not to restrict exports to the United States, but to let Americans sell more to Japan. That approach, while not assured of success, will at least force a showdown later this year.
The new stance on trade is grounded in the condition of the global economy. The United States has led the world in recovery from the recession of 1980-82. Foreigners have rushed to invest in American securities. In effect, other nations are supplying about half the money required to pay for this country's federal deficit of $200 billion. As a result the dollar has soared -- up by some 40 percent against other currencies since 1980.
The rise of the dollar has priced American goods -- from agriculture through steel to high-tech -- out of foreign markets. This country is not selling nearly enough merchandise abroad to pay back the foreigners for financing the budget deficit. Instead the United States is borrowing abroad, thus slipping deeply into the red, and accumulating interest charges that will burden Americans for many years to come.
Japan plays the major role in this global account. The Japanese are the biggest investors in this country -- over $25 billion last year. They also have the biggest trade surplus -- more than $30 billion last year.
Their products not only cut deeply into American markets in such industries as autos and steel and electronics. The Japanese have also been very slow to open up their own markets for American producers. Bitter hostility to Japan now colors the mood of American business. Sentiment for an- across-the-board surtax on all exports is widespread. The more so as the revenues would ease the federal deficit.
During similar crunches in the past, the Washington response was to press the Japanese to cut back exports competing with American industry. Thus in the 1960s the United States forced the Japanese to restrict textile exports. During the following decade, the Japanese were obliged to hold down steel exports. The first Reagan administration elicited from Japan a "voluntary" accord, whereby exports of cars to this country were restricted at a rate now running at 1.85 million yearly.
The policy of restricting Japanese exports has yielded bad fruit. For one thing, before giving an inch, the Japanese act as if they were still fighting World War II. The United States expends so much effort achieving Japanese restraint that it then lacks the energy to open up markets for American goods.
Moreover, the restrictions benefit only a few U.S. producers, while doing harm to American consumers. U.S. auto companies enjoyed record profits thanks to limits on Japan, but the cost of autos to the American public has risen by about ,000 per vehicle. Finally, the restraints protect inefficient manufacturers who, over time, lose global markets anyway. Despite ample protection, for example, the American steel industry and the number of workers it employs have been shrinking steadily.
The decision of the Reagan administration to shift tactics was occasioned by the expiration of the auto quotas on March 31. Despite vigorous protests from the auto union, and some auto- makers, the administration decided not to ask for a renewal of the restraints. Instead it is concentrating on opening up Japanese markets for American products. Hopes have been particularly high for a jump in U.S. exports of telephone equipment and wood products.
Nobody is certain exactly what will happen now, but a rocky, testing time looms ahead. The Japanese have been dragging their feet on negotiations for opening markets for lumber and telephone equipment. Last week Secretary of Commerce Malcolm Baldrige suspended the talks on the grounds that the Japanese were not getting down to specifics.
For their part the Japanese have been warning that, without an agreement, they would not be able to police auto sales to this country. One report asserts that after April, Japanese auto exports to the United States will surge at a rate of an additional 750,000 annually.
If so, a showdown is at hand. There would then be enough votes in Congress to pass a general surtax on all foreign exports to this country. The stage would be set for a trade war among the United States, the Japanese and the rest of the world. It is possible that eventually there would be a significant increase in protectionism everywhere -- a new mercantilism.
The Reagan administration hopes that threat will impart a dose of sobriety to all nations. The theory is that Japan will curb a surge in auto exports. The administration would then be well armed to beat back any push for generalized protection in Congress. Having "de-protected" autos in this country, it would then be in strong position to press similar actions all around the world. The stage would be set for the administration's preferred solution to global economic problems -- a new burst of free trade.