For the past six months the Clinton Administration has been engaged in a steadily increasing war of words with the Japanese to pressure them to take concrete actions to reduce their "chronic" trade surplus with the U.S. by committing to quantitative targets for U.S. goods sold in Japanese markets. This pressure was, in part, triggered by the fmding last summer that Japan did not achieve its previously agreed to numerical targets on the market share of U.S. imports of microchips to Japan in 1992. Combined with a steadily deteriorating current account balance with Japan, this has led the Administration to raise substantially the risks of a serious trade confrontation with the Japanese in which we all would become the losers. Moreover, the threat, veiled or not, of sanctions imposes costs on consumers and are unlikely to generate significant results. Markets are disrupted, and uncertainty is increased.
Unfortunately the Administration seems intent on form over substance. The bilateral trade balance with any particular country should not be of major concern to the U.S. any more than an individual's "chronic" imbalance with their local grocery store. Moreover, even successful attempts to pry open a few selected segments of the Japanese domestic market to foreign producers are unlikely to have a substantial impact on the balance of trade. The recent variation in our trade position has much more to do with our own consumption-savings choices and the relative performance of the U.S. economy over the past nine years.
