TRADE WARS: "OFF WITH THEIR HEADS"

September 1987 - Tokyo Business Today

One of the several rewards of the lecture circuit in Japan is a close feel of the Japanese pulse. Questions are few, but instinctive responses are strong. And the one topic that really gets pulses racing and instincts responding is the idea that it is the U.S. and not Japan that is bad (warui) in the current trade dispute.

Books and articles here make the same points: Japanese firms work hard to make good products welcomed by U.S. consumers. Meanwhile U.S. firms make only the flimsiest of efforts to break into the Japanese market. The U.S. then demands export restraints. But when Japan did cut its car exports, U.S. car company executives began paying themselves million dollar bonuses from their artificial profits. U.S. fiscal deficits have also distorted the trade situation. And so on.

On the face of things these are powerful arguments. The only problem is that they fail to realise what international trade is all about. Trade is not some sort of beauty contest, with Cinderella eventually prevailing over the ugly step-sisters. Rather it is a matter of different economies, both the beautiful and ugly, selling what they can to buy what they need.

The Indian economy for example is pretty ugly, and most of its warts and wounds are self-inflicted. But no one suggests that it is therefore obliged to buy all and everything that glamorous Japan can produce. Indeed India would be highly irresponsible if it did not protect its inefficient industries from Japanese competition. As the U.S. slips further and further into Indian-style mismanagement, its obligation to protect domestic industries and employment gets greater rather than less.

That said, one sympathises with one aspect of the Japanese view - the intense dislike of U.S. trade moralising. It is the nature of the U.S. beast to rationalise and justify. So when the U.S. has trade deficits it will not admit that this might be due to its own weakness. Complex arguments have to be invented to prove that the blame lies with the other side. If it wants to shut out foreign goods, it does not simply say so. Instead, complex legalisms have to be devised. For the non-argumentative, non-legalistic Japanese the effect is traumatic.

Sometimes I think the U.S. and the rest of the world do much better avoiding the rationalisations. If they want to protect an industry, they should do so arbitrarily, just as Japan used to do. If they want to retaliate then, that too should be arbitrary, in the manner of an angry parent slapping down a fickle child.

Japanese conservatives used to criticise harshly Western post-war attempts to punish Japan's war criminals. In particular, they disliked the nit-picking way the Allied Powers set out to prove the guilt of each and every criminal before handing down a verdict. One well-known conservative used to say how cruel and inhuman it was to submit people to such a prolonged psychological torture. He pointed out how the Japanese army did not waste time on such details. If it captured an undesirable, it simply chopped off his or her head immediately on the spot. Clean Japanese emotionalism was superior to dry Western legalism any day, he used to insist.

Maybe he had a point. If the U.S. decides it does not want any more Japanese semi-conductors, trade surpluses or washing machines, maybe it should just say so, and act accordingly. In the process it might even earn some respect in Japan, for clean emotional decisiveness.

P.S. My column in the June issue of TBT referred to the "Coca Cola argument" over Japan-U.S. trade. This meant the argument that sales of U.S. companies like Coca Cola in Japan should be included on U.S. exports. It did not mean that the Coca Cola Co. supports this argument.

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