The most immediate and obvious benefit of the last-minute trade agreement between the United States and Japan was that each side had the good sense to avoid actions that could have escalated into a trade war. Avoiding the sanctions threatened by the Clinton administration was a dual win. If agreement had not been reached and import fees had been doubled on the designated Japanese luxury cars, thousands of jobs in both countries would have been jeopardized.
However, what actually was set down in the agreement remains open to varying interpretation, depending on whether the reader is American or Japanese. Each side claims victory, but it appears that each side actually blinked. The United States gained broad assurances that Japan will open its markets to American-made autos and auto parts, but Japan escaped having government-set targets written into the agreement. Accompanying the agreement, but not actually part of it, was the announcement by Japan's five largest automakers of increases in production in North America and purchases of U.S. parts for use in plants abroad and in Japan.
In this case, it's good that each side blinked. International trading partners must be willing to negotiate if business is to flourish. The United States' determination to penetrate Japanese markets is understandable considering that automobiles account for the largest chunk of the trade imbalance between the two countries. Last year, the auto trade deficit alone totaled $37-billion, or 56 percent of the total trade imbalance with Japan.
But a world power must also consider its role in upholding the rule of law. The Clinton administration should have sought to resolve this dispute through the World Trade Organization before striking out on its own. That is the whole purpose of the WTO, which our government was instrumental in creating, and American negotiators cannot choose to ignore it when it suits them and expect our WTO partners to take it seriously.
As for Japan, this could be its last chance to follow through on its promises to open its markets without submitting to strict quotas. Reneging again will result in a loss of credibility that could do the country more damage than any encroachment into its markets by American goods.