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The Unthinkable: A Trade War With Japan
| Article
# : |
19976 |
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Section : |
CURRENT ISSUES
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| Issue
Date : |
8 / 1992 |
3,020 Words |
| Author
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Douglas Ostrom
Douglas Ostrom is senior economist at the Japan Economic
Institute of America, a Washington-based research
organization that specializes in U.S.-Japan relations. |
So far, the United States and Japan have been lucky. In the postwar period, Americans and Japanese negotiators have argued over everything from oysters to baseball bats as well as textiles, cars, semiconductors, cellular telephones, oranges, and rice, to name just a few. However, the specter of a trade war--in which each side knowingly takes economic actions hostile to the other--has kept the two sides talking, with the result that a trade war so far has been avoided, although sometimes just barely. However, the exact dimensions of a trade war or its cost rarely are spelled out; the toll is assumed to be horrendous. As a consequence, few policy-makers are able to describe in any detail what catastrophe they are trying to prevent.
After multiple experiences with oranges, semiconductors, and other goods and services, old Washington and Tokyo hands may have developed a sense of numbness and complacency. A thousand close encounters with a trade war may well have convinced many in both capitals that the real thing is impossible; that the apparently suicidal nature of such a conflict is enough to prevent it from actually ever occurring.
In the early 1990s, however, events far from Washington and Tokyo changed the dynamics, increasing the chance of a trade war. Critics in the United States argued that Washington during the postwar period typically had caved in to Japan over economic issues, either during the negotiations or the monitoring of a subsequent agreement. These critics suggested that the United States had let Japan off the hook repeatedly because the cold war made it important that Tokyo not be alienated. With the breakup of the Soviet Union, this argument continued, Washington could take the gloves off and drive the hard bargains that would be in this nation's interest, even is such a stance meant that an agreement with Japan often might prove elusive.
A breakdown of negotiations--or even unfriendly unilateral economic actions--would not signal necessarily that a trade war had begun. The United States had imposed economic sanctions against Japan several times in the postwar period and few labeled the actions a trade war. A full-fledged trade war would involve far-reaching, restrictive actions, probably taken by both sides, that are clearly hostile in nature.
The analogy between a trade war and a shooting war is closer than usually realized. Prior to the Persian Gulf conflict with Iraq, the United States and its allies began a trade war with Baghdad. We called it an embargo. The idea was to bring Iraq to its knees by
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