Despite September's record $15 billion trade deficit -- one-third of it with Japan -- the administration privately believes its initiative bringing the dollar down has defused the protectionist drive in Congress, at least for this year.
That may be a correct judgment, although the Democratic leadership in Congress still thinks there is political mileage to be gained from a trade program -- calculated to be halfway between total protectionism and what they call pure free trade -- designed to gain greater access to foreign markets.
The Gramm-Rudman balanced- budget phenomenon makes one cautious about predicting what Congress might do in any set of circumstances. But in the end, the way the legislators tilt may be decided as much by the widely held perception that Japan pursues "unfair" trading practices, as by the actual developments in the dollar and the trade statistics themselves.
U.S. exports to Japan over the past five years have crept upward: $20.8 billion in 1980; $21.8 billion in 1981; $20.9 billion in 1982; $21.9 billion in 1983; and $23.6 billion in 1984, while Japanese exports to the United States in the same period almost doubled from $33 billion to $60 billion. The great debate is whether the stagnation in American exports to Japan is due to Japanese trade barriers -- fair or unfair -- or to the effect of the overvalued dollar.
This issue was argued (with no agreement reached) by a group of American and Japanese economists brought together here 10 days ago by the Institute for International Economics. Former undersecretary of state Richard Cooper cited a long list of "anecdotal" evidence of unfair Japanese practices -- some from his own official negotiating experience. He saidit add up to "a legacy of distrust and frustration."
On the other hand, C. Fred Bergsten and William E. Cline of the institute argued that the "anecdotes" aren't supported by real evidence. Adding up all the unfair practices they could document, Bergsten and Cline put an outside tag of $8 billion on questionable Japanese trade practices out of a $50 billion surplus expected with the United States this year. A lower dollar rate, they say, would cut the Japanese surplus to a reasonable $20-$25 billion range, at which point, Cline says, "we should declare victory."
Cooper doesn't reject the view that macroeconomic problems are at the core of the trade issue. Nonetheless, he contended that the conception that the Japanese don't play fair is "widespread, and is not limited to Americans." He saw nothing extraordinary in Japan's aggressive use of export credits (it's no worse than the French practice) or in the use of import "standards" to keep out goods.
On the latter point, a separate study by lawyer Peter Edelman comes to a different conclusion: that the Japanese standards system creates "real" barriers to imports.
Cooper's concerns go to the less tangible. He thinks that the Japanese government by and large is trying to make the right decisions. But Cooper cited a long list of examples of "informal protectionism" by middle managers in both government and private industry, driven by the idea that Japan is a vulnerable country.
For instance: the late Otto Eckstein, founder of Data Resources, Inc., tried to get his advisory service into Japan. But because all of DRI's computer hardware and software were in Lexington, Mass., he needed a leased line. "There was no problem, nor formal obstacle, but two years later, he still didn't have a leased line. And by that time, there was a local Japanese competitor on the market. . . ."
Or take the case, said Cooper, of an American firm that developed a succesful diagnostic drug for hepatitis. It passed the Japanese equivalent of the Food and Drug Administration for sale in Japan, "but it happens that 80 percent of Japanese pharmaceutical sales are controlled by the national health program. . . . After five years this particular drug was still not certified for use by the national health department."
The Bergsten-Cline study finds that actual Japanese protection -- taking into account the ratio of imports to GNP (American exports of manufactured goods to Japan are second only to our exports to Canada) -- is about average among industrial countries."
As to the anecdotal evidence, says Cline, "if I went down the list and put a dollar value beside each one, they wouldn't add up to much. . . . I think that one of the basic fundamentals we ignore is that Japan has a very strong comparative advantage in manufactures. . . . But these anecdotes poison the atmosphere so that the exporters don't even try to get into the Japanese market, which is too bad."
Coper concedes Cline's point. "A lot of these anecdotes are out of date -- Otto Eckstein was still telling his story 10 years after it happened. The problems are less acute today than they used to be. So there's been some progress. But perception or reality, it's all part of the political reality."