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... Trade Relations with Japan and
the Pursuit of America’s Interests in the WTO
Remarks of
Alan Wm. Wolff
Partner, Dewey Ballantine LLP
at the
American Chamber of Commerce of Japan
Tokyo
February 8, 2000
1999 Bilateral Merchandise Trade Balances Between
The United States, Japan and China
(as viewed from the United States)
($ billion)
China
U. ...
Japan
[-$346]
[+29] [+108]
$69 $73
$19
• Direction of arrow is toward deficit country in bilateral trade
• Data in brackets are each country’s trade balance with the world
Source: U. ... Bureau of Census; China data from MOFTEC: Japan data MOF. ... data
estimated from 11 months of 1999 actual data; Japan data estimated from 10 months of 1999 actual
data. Bilateral trade balance between U. ... : Japan and U. ... Bilateral trade
balance between Japan: China based on Japan data. ... Trade Relations with Japan and
the Pursuit of America’s Interests in the WTO
By March 1, by law, the U. ... Trade Representative must report to the Congress on
whether membership in the World Trade Organization (WTO) serves Americas interests. ... trade relations with Japan. This
will be the second most important trade vote to be taken by Congress in the year 2000. The more
contested debate is likely to be over the granting of permanent normal trade relations (PNTR) to
China. ...
What I intend to do today is to preview the issues that Congress will be debating, to
provide an assessment of where the balance lies, and to examine where improvements are needed
in the tools America currently has to deal with trade problems. ... Two of America’s most important trading
relationships -- with Japan and China -- have become deeply entwined with the current and
potential operation of the WTO. In the case of Japan, five years ago the United States made
decisions in the Uruguay Round that have resulted (whatever the original intention) in having its
trade with Japan governed almost solely by the WTO agreements, and no longer by bilateral
understandings. In the case of China, the principal members of the WTO (as well as China
itself) have opted to have their future trade regulated by the WTO rather than by bilateral
agreements The successful operation of the WTO has thus become key to trade relations
between the United States, on the one hand, and Japan and China, on the other. ... While the
President can negotiate with foreign countries, there is very little in the trade arena that he can in
fact implement without authority being delegated by Congress. ... In these respects, the
multilateral trading system will be assessed in part by comparison with the bilateral trade
regimes that preceded it. In the debate accompanying the vote on this question, the effects of
the operation of the WTO on America’s trade relations with Japan will be given special scrutiny.
Why America Champions Multilateralism
America’s support for a multilateral approach to international trade relations was born
during the Second World War and was shaped by the Great Depression. ... Economic reconstruction and
3
development, through finance and expanded trade, were to be the primary tools in shaping a
better world. ... Executive Branch pressed forward with multilateralism in trade, in the
late 1940s, the Congress was wary of the approach. It did not approve of the International Trade
Organization, and that institution never came into being to take its place alongside the Fund and
the Bank. Instead, a multilateral trade contract, the General Agreement on Tariffs and Trade (the
GATT), was entered into. ... By 1988, the Congress did accept
the GATT in the Omnibus Trade and Competitiveness Act. ... In particular, there is a feeling that Japan has allowed its state
developmental capitalism to linger on well after its usefulness was exhausted.
Part of America’s free market prescription is to match deregulation at home with a
program of opening all markets to international trade. ... Market opening on a multilateral basis can be achieved more efficiently, in theory and
often in practice, by assembling in one place all countries and signing them onto as many trade
liberalizing agreements as can be produced at the one time. This is part of the theory behind the
creation of great multilateral trade negotiating rounds. ... Was Seattle to be a momentary interruption in the general movement toward
greater trade liberalization, or was it an inflection point, where a noticeable change in the
direction of the world trading system would be later discerned? ... ” But before assessing where the future of the WTO may lie, it is worth
examining the conduct at Seattle of the two participants whose countries are most relevant to this
meeting – the United States and Japan. ... purpose was
clear – to make a grand effort to obtain a new round of negotiations to bring about maximum
trade liberalization as part of a rules-based system. ... Its team was led by the President and included most of the members of his Cabinet
who had responsibilities for some aspect of trade -- the Secretaries of State, Commerce, Labor,
Transportation and Agriculture, the U. ... Trade Representative, the Deputy Secretary of the
Treasury, and the President’s Chief Domestic Economic Advisor. Despite President Clinton’s
pleas for cooperation to foreign leaders, including most notably a lengthy mid-week telephone
conversation with Prime Minister Obuchi of Japan, the effort collapsed. ...
What was Japan’s part in all this? First some history: From an American perspective,
Japan, in the past, has mostly sought to avoid notice at multilateral trade negotiations. Japan,
being more closed to imports than other industrialized countries, it appeared to feel vulnerable in
any leadership role. ... Japan played a major, and wholly negative, role.
As noted, America’s principal objectives are to obtain open market access and to preserve
its ability to defend itself with trade measures against unfairly traded (primarily dumped) goods
6
that injure domestic industries. ...
Japan’s overt protection involves primarily agriculture. At this meeting, Japan advanced
a new, more sophisticated and dangerous rationale for blocking further trade negotiations. ... 1
In describing Japan’s position at Seattle a few days later, Japanese officials used rhetoric
reminiscent of some of that which, in very different circumstances, was employed by Japan in
the 1930s. Japan, which is a chronic underperformer as in importer of manufactured products
from developing countries, portrayed itself as a champion of less-developed nations against the
United States –
On December 3, when negotiations were at their peak, one senior MITI official
who made a comment on the negotiations with the U. ... ” [He said],“If we draw back now, developing countries will never
trust us. ... President
Clinton on the morning of December 3 (early morning of the 4th in Japan), Prime
Minister Keizo Obuchi turned down [the President’s] pressure, saying, “This time the
discussion is multilateral, not limited to Japan. ... made a miscalculation
regarding the Japanese [stance]: Japan, supported by developing countries which have
also been closed out of [the U. ...
Indeed, there was a tactical success for Japan, even if not due to its efforts. ... But was this in Japan’s strategic interests? Perhaps no nation benefits from
the world trading system more than Japan, judged by the generally mercantilist standard of state
developmental capitalism – its vast trade surplus. But in achieving its tactical, short-term
success, Japan was risking everything. It was working at undermining American support for an
open international trading system, on which Japan’s future prosperity is dependent. MITI was
being reckless when so much of Japan’s national interest was at stake.
What could Japan have done differently? ... What if Prime Minister
Obuchi had responded to President Clinton’s call, by interpreting it as a call for Japanese
2 “99 Seattle Meeting: WTO, Japan Stopped ‘Making Concessions to the U. ... In particular, for his planned meeting with the European Union in January
2000, he reportedly gave assurances that the Japanese government would work upon its
European counterparts to side with Japan:
. ... " 3
MITI is responsible for much of Japan’s economic miracle that extended through the 1980s. Its
ranks are formed from many of the top graduates from Japan’s most prestigious educational
institutions. But like other political figures in Japan or elsewhere who engage in reckless
3 “[Government] Will Respond with Frontal Attack on the U. ... ”
But while the stance at Seattle was new for Japan with respect to multilateral
negotiations, it represented no break from Japan’s newly confrontational stance in trade talks
with the United States. ... -Japan Bilateral Trade Relations
There is not space, time, or energy to catalogue here in any detail the stormy history of
U. ... -Japan bilateral trade relations. ... The most common
word to describe the seemingly endless series of disputes between the United States and Japan is
trade friction -- from the late 1960s (primarily in textiles), through the 1970s and 1980s (beef,
citrus, apples, cherries, leather, wood products, paper, glass, autos, auto parts, computers,
semiconductors, telecommunications procurement, etc. ... In fact, of the 424 page current volume of detailed foreign
trade barriers published annually by the U. ... Trade Representative, listing market access
problems with scores of countries from the Arab League to Zimbabwe, Japan takes first prize
with market access problems filling 58 pages.4
Any number of approaches has been tried to resolve problems of Japan market access.
These have included talks on individual trade items, various liberalization packages, various
4 1999 National Trade Estimate Report on FOREIGN TRADE BARRIERS, issued by the United States Trade
Representative. ...
trade retaliation (none occurred) and a mock kendo match between the then U. ... Trade
Representative Kantor and the then MITI Minister Hashimoto. The picture of the match made
all the newspapers and the evening television news but did not result in additional sales of
foreign autos in Japan. ...
Perhaps Japan’s central objective in the last major round of GATT negotiations -- other
than to maintain protection for agriculture -- was to blunt the threatened use by the United States
of trade leverage (under section 301 of the Trade Act of 1974). In the view of its trading
partners, the threat of section 301 was being continuously applied by the United States against
what it regarded as the recalcitrance of its trading partners, often Japan -- in order to extract
bilateral commitments for further market access. ...
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America as a defendant, when it transgresses, has a remarkably transparent law-based
system of trade regulation. ... How will it show that the Japanese
economy is rigged in a variety of hidden ways – for example through prefectural limits on
operation of discount stores, or the stifling of competition through the Premiums Law
administered by the Japan Fair Trade Commission? ... It
has been shown, in the Japan photographic film and paper market access case, to be unable to
make any useful findings whatsoever with respect to these more complex forms of protection.
This was a loss for both sides: America was not vindicated in its complaint; Japan was under
much less international pressure to reform its archaic distribution system, which is a great burden
on the Japanese economy.
Approximate Word count = 8992
Approximate Pages = 36
(250 words per page double spaced)
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