The MacNeil/Lehrer Report; US-Japanese Trade Imbalance

ROBERT MacNEIL: Good evening. Japanese Prime Minister Takeo Fukuda is reported today to have ordered his cabinet to take measures to ease the growing friction with the United States over foreign trade. On behalf of President Carter U.S. officials in Tokyo have demanded that Japan take "drastic measures" to reduce its huge trade surplus by the middle of De- cember. Japanese goods from steel to cameras have been flooding the United States markets this year. This year Japan is expected to sell up to eight billion dollars more in the United States than she buys in goods from us, and some people have projected that Japan`s overall trade surplus with the entire world in 1977 might reach as high as $20 billion. Some U.S. officials have been quoted as saying that trade relations between the two countries are more strained now than at any time since World War II. The value of the dollar, which has been falling against the Japanese yen, hit a new low again today -- 241.30 yen to the dollar. Tonight, the meaning of the growing trade confrontation between Washington and Tokyo. Jim?

JIM LEHRER: Robin, this is not one of those problems of interest only to economists and international trade experts in ivory towers. It`s a problem of hard-nosed, practical domestic politics in both countries. President Carter and members of Congress are getting heat from both industry and labor to do something, and do something fast. Too many American companies are having to lay off workers or cut back in expansion as a result of being on the losing end of head-on competition with Japan, the TV manufacturing and steel industries being two of the most publicized cases. The fear is that unless something is negotiated on a voluntary basis with Japan political reality may cause Congress to pass severe protectionist trade laws, which could foul up the administration`s overall game plan for multilateral trade agreements with other countries all over the world. The Japanese government, of course, has similar domestic pressures on it from its own industry and labor leaders. It is in this atmosphere that the two governments have been talking in Tokyo. The President`s message has been formed and delivered by a special trade task force set up for that purpose, and Assistant Secretary of Commerce Frank Weil is a member of that task force.

Mr. Secretary, does the Japanese action today, the announcement by the Prime Minister, resolve the problem from the U.S. point of view?

FRANK WEIL: I`d like to say that it resolves the problem, but I`d have to say that - though I`m not fully briefed at this point, it just came in early today - that it is a step in the right direction. But we would like in the longer run to see the Japanese economy more receptive, more open to American manufactured goods, as is ours to them. That has been the fundamental problem, that we have simply not been able to export to them to the same degree as they have to us.

LEHRER:I noticed a Reuters dispatch on this particular announcement from Tokyo today that mentioned the seven proposals, but two or three of them were things that were already part of Japanese policy. Do you see anything in those seven points that really could give the United States what the United States wants, and the reason for the task force being formed and going over there in the first place?

WEIL: The seven points -- and I repeat, I`ve not been sufficiently briefed on this or had a chance to study it -- but the seven points include some steps towards the objectives that our representatives in Tokyo were recently discussing with the Japanese government. But the more basic objective would be to see a significant increase over the next several years in the percentage of imports into Japan that goes in manufactures.

LEHRER: The proposals, in other words, would not fit the definition of the term that Robin just used, "drastic measures," which the United States had asked Japan to make?

WEIL: Well, they`re important steps; I don`t want to minimize that. And how one gets precise about terms like "drastic measures" can be very complex. So I should say that I would disagree with one thing, which is that I think the relations between the Japanese and the United States, between our governments, are as good as they`ve ever been; and these conversations are taking place in a very cordial and friendly way. We have common problems, as you stated, and I think that there is a real true sense of a desire to cooperate here. Both governments have limitations as to what they can do.

LEHRER: Is it true that -- according to the reports, at least -the United States has given the Japanese government until the middle of December, December 15 specifically, to come up with something?

WEIL: I think that`s an inaccurate report. We`ve not given the Japanese any specific targets, any deadlines, any ultimatum. We have simply been expressing the seriousness of our concerns with our ability to contain our domestic problems.

LEHRER: Mr. Weil, Business Week magazine said yesterday that you personally have been trying to tell people since July, people within the government, that this trade deficit situation with Japan was rapidly getting out of hand but, according to Business Week, nobody would listen to you. What was the problem? They`re listening to you now; why not then?

WEIL: That report was not precisely accurate. What I was speaking of earlier was the overall trade position of the United States versus the world, of which the Japanese is a not insignificant part. We`ll have a trade imbalance this year with the world approaching $30 billion, and the Japanese portion of it is about a quarter. The basic trade problem against the world is of course oil; with the Japanese it`s entirely in the manufactures area. And because of that the Japanese situation exacerbates an already difficult situation. Since last spring the facts have become clearer, and I would say that there`s a general unanimity in this ad- ministration about these problems now.

LEHRER: There`s no question that this is a serious problem in the view of the government.

WEIL: Yes, that`s right.

LEHRER: Thank you. Robin?

MacNEIL: One of the Japanese in this country who is most familiar with these issues is Hiromu Fukada, Economics Minister with the Japanese Embassy in Washington. Mr. Fukada, did your government Interpret the American approach as an ultimatum?

HIROMU FUKADA: No, Mr. MacNeil; as Mr. Weil has just told us, we would like to take this as a common problem facing both of our countries. We are working together to solve the problem, and this visit on the part of the United States government of show team to Japan last week was one very important effort along that line. We are really working together.

MacNEIL: Did you call it a show team, sir?

FUKADA: I wouldn`t.

MacNEIL: I must have misunderstood you. The rhetoric that the team uttered to the press in Japan sounded very strong indeed. I wonder, to the Japanese ears were they talking as tough in private as they were in public? In other words, was it your interpretation that a lot of this was for the benefit of the U.S. Congress?

FUKADA: Well, I`m sure that people realize that the problem is a very serious one, and it`s not understatement on the part of these people to say the situation is very serious and almost grave. But on the other hand, we don`t want to take this as a threat or demand or ultimatum. These are a series of suggestions to our people, and as I said, we are just jointly trying to find out a way out of this difficulty in which we find ourselves.

MacNEIL: Well, the U.S. officials there told the press that they`d asked Japan to take "drastic measures." You probably saw, that was widely reported in all the papers here. Were the measures the U.S. was asking not drastic in the Japanese mind?

FUKADA: Well, people are asking us to take a series of bold measures. Now, you can call them drastic. We need some changes, perhaps, but I would rather prefer to use the word "bold."

MacNEIL: I see. Can you tell us in any detail what the Japanese Prime Minister did order the cabinet to do today? Have you been briefed on that?

FUKADA: To a certain extent, yes, but certainly I don`t want to discuss the specific details. We have various problems involved. For instance, our economic growth; that really is the source of all existing problems, in a way.

MacNEIL: Can I just background that by asking you, did, as reported, the U.S. delegates ask your country to increase its economic growth target to eight percent?

FUKADA: I wouldn`t like to discuss any specific measure, but it`s generally expected that we are trying to obtain a growth rate of something like six percent for the fiscal 1978. This year we are trying desperately to get this figure of 6.7 percent. Now, the newspaper reports say that people have been talking about some figure or that, but the important aspect of this approach is the desire on the part of the American people to see stepped-up economic growth in Japan, and I don`t think a specific figure is very important.

MacNEIL: But did the Prime Minister today urge his cabinet to step up economic growth, in response to the American urging?

FUKADA: Well, that really is the key to the problem. Of course, when it comes to details, certainly we should, for instance, try to import more from abroad. People are unhappy that we are importing, relatively speaking, a little amount of manufactured products from the United States. Now, we are not a planned economy, as you know perfectly well. We cannot tell our consumers to buy this or that. But at the same time we understand that there exists disappointment on the part of the American business people that their products are not sold in Japan in the manner.

MacNEIL: Would you agree that Japan, in comparison with the United States - - and Mr. Weil seemed to be implying this -- is a protectionist country?

FUKADA: Well, it`s very difficult to describe. You have your problems, coo. You see, no one country is categorically more protectionistic than the other. Of course, we have our problems, I admit. Some year, for instance, in the agricultural sector we certainly have to think of our own farmers. You know, there has to be consideration to these people who are trying to diversify their line of production. The sudden inflow of foreign agricultural products may ruin their lives. So we certainly cannot take that kind, of risk. But if people suggest that we should gradually ease our restrictions, gradually expand our quotas, that kind of thing is certainly being considered.

MacNEIL: Thank you, sir. Jim?

LEHRER: Another perspective now from John McClenahen, Washington editor of Industry Week magazine who covers international trade for the industrial and corporate trade magazine. Mr. McClenahen has just returned from a trip to Japan. Mr. McClenahen, you talked to both Japanese businessmen and government officials while you were there. Did you get a feeling that they understood the U.S. position on all of this?

JOHN McCLENAHEN: Jim, I think there is a very good understanding of the U.S. position, and I think one of the greatest dangers in this whole area right now might be to underestimate the concern that the Japanese government officials and that Japanese businessmen have for improving the relations between the United States and Japan, improving the economic re- lations, particularly the trade relations.

LEHRER: Do they see it in urgent terms, the way American business does?

McCLENAHEN: Very urgent terms, and several people talked to me in terms of a two-step process: basically resolving the steel impasse right now through some mutually agreeable measure, bilateral measure between the United States and Japan; but then moving or. to a multilateral discussion, a many- nation discussion of the world`s major trading entities to try to find a better way for a program of safeguards devices which let all nations make temporary adjustments to big inflows of imported goods. There is a hope that this could be accomplished in the current worldwide trade talks which are going on in Geneva.

LEHRER: It starts in January. Again, that`s the reason for the crucial deadline time between now and then on these unilateral talks, is it not?

McCLENAHEN: That`s exactly right, and there is at the same time a fear that a full formula will not be able to be worked out by next spring and that some of this momentum that has been generated from the short-solution should carry forward beyond the end of the current go-round.

LEHRER: Back on a very, very practical level, did any Japanese businessmen tell you, "Hey, look, if we can manufacture and sell a television set for less than the United States manufacturer can make and sell a television set, why should anybody`s government come in and prevent us from doing so," and the basic economic problems that they would suffer if in fact there were various trade agreements that would restrict these things -- did you get any of that?

McCLENAHEN: Not in those direct terms. What they do say is that the United States traditionally has not thought in terms of worldwide markets. And they understand that one of the reasons the United States has not thought in terms of worldwide markets is that the U.S. market itself is so large, and they appreciate that the reverse is not the case. But to go back to your point, yes, there is a feeling that if they can produce a quality product that gains consumer acceptance, yes, they should be allowed to sell it because if anything, probably it`s going to benefit all consumers in the long run by competitive pressures to hold prices down, to improve cost structures.

LEHRER: And by the same token, they would be willing to compete in an open way with American products in Japan as well?

McCLENAHEN: This is what they say, but there are a good number of people in U.S. industry who would question that.

LEHRER: All right, thank you. Robin?

MacNEIL: Another journalist who has studied this confrontation is Thomas E. Mullaney, former financial editor, now a financial columnist with the New York Times. Mr. Mullaney, has Japan been so protectionist as compared with the United States that the U.S. is justified in making these demands now?

THOMAS MULLANEY: Well, whether they`re justified or not, I think it`s clear that there have been impediments to a completely free flow of goods.

MacNEIL: What kind of impediments?

MULLANEY: Well, there are things like tariff barriers, higher tariffs on some things; the quantitative quotas on certain types of goods; there have been things like inspections and regulations and licensing -- things like that, that impede the free entry of some American goods into Japan.

MacNEIL: Because of course after the War, this country was the great source of consumer goods and Japan had no economy and then had to build one.

MULLANEY: That`s correct.

MacNEIL: Would you go so far as the New Zealand Prime Minister today,

Mr. Muldoon, who held a press conference in Los Angeles and he said this: "There`s got to come a time when Japan becomes a good international citizen in trade terms. Japan has got to be dragged kicking and screaming into the international community; they`ve got finally to stop being Japanese and become international citizens," Is that an overstatement of the situation?

MULLANEY: I think it`s an overstatement. I think that this is a time for calm discussion and calm negotiation and some progress on both sides, getting Japan to agree to, say, increase its growth rate to a certain extent and that growth rate should not arise because of increased exports but spurring the internal economy, promoting consumer spending in Japan, promoting investment in Japan and international investment by the Japanese; and then of course trying to reach some sort of agreement on how products in contention, such as steel, are handled.

MacNEIL: One suggestion that`s been made by the U.S. in reference to steel is the so-called "reference price system." I suspect we`re going to be discussing that a bit; could you tell us how exactly that is supposed to work?

MULLANEY: Well, we have not had the details yet of what the administration team is thinking on this. But from reports, there is a plan to establish what is called a reference price. This supposedly would be a price at which all foreign steel would be allowed to enter the United States; it would be a price that was supposed to be an equitable price that would not be below so-called "fair" pricing level. And then there would be, presumably, a discount -- five percent below that figure foreign producers would be permitted to send their steel --both European and Japanese, of course - into this country at that level. The problem here would be -well, there are several problems here. One would be, what would be acceptable, to foreign steel producers and to American industry and American labor and Congress and everyone else, an acceptable level for a reference price. It`s been very hard to agree on what.

MacNEIL: Presumably, it would be somewhere below the American price, would it?

MULLANEY: It may very well be below the American price, but it would be also presumably above levels that some foreign steel has been entering the country. And not only Japanese, I should say, but also European steel, and perhaps more European steel recently than Japanese steel. But the problem would be establishing prices for many, many steel products; it would be an administrative nightmare, I think, unless it`s very astutely managed.

MacNEIL: Before we go on about the problems, let`s ask Mr. Weil, is this one of the sort of practical solutions that the administration, as reported, is considering, and is that roughly how it would work?

WEIL: I`m not entirely at liberty to discuss this because, as Tom pointed out, the program has not been officially presented. The reports that have appeared in the press are substantially accurate. I think that I could say that it is felt by some in the administration -- by most, in fact -- that what we`re having to deal with here is the least worst choice of options to deal with a very exaggerated problem at the present time.

MacNEIL: I see. Could I ask you this, Mr. Weil: we`ve all been reading, as I said earlier, these reports in the press here about the drastic measures that the United States had asked for in Japan, this special task force, which suggested a very different tone than the tone you, Mr. Weil, and Mr. Fukada from the Japanese Embassy have just been suggesting for these conversations. It sounds as though there`s sort of a double standard in rhetoric going on there. How do you explain that?

WEIL: Well, I can`t explain that, other than to say that we have serious problems; nobody would deny that. Mr. Fukada has agreed with that. I think that we should all take considerable pride in the fact that here are two powerful, great nations in the world that have serious problems that are being discussed with openness, candor, and with friendship. And maybe that seems to be inconsistent, but I think that that is one of the great advances in the world in the last fifty years, and I don`t think that we should allow our openness and our friendship to disguise the fact that we want to try to deal effectively with these problems.

MacNEIL: Mr. Fukada, how to you describe this sort of double standard of rhetoric that I`ve referred to?

FUKADA: Well, first of all, I don`t know whether it should be called a double standard of rhetoric, or anything. I heartily agree with Mr. Weil that, as I said earlier, if I may repeat, we are working together for a common cause, to face a common problem facing us both, you see. So the atmosphere naturally is very friendly and cordial. It cannot be otherwise.

MacNEIL: The atmosphere didn`t sound too friendly and cordial from the New Zealand Prime Minister today, who said that, for instance, unless Japan accepted a great deal more New Zealand dairy produce you would not get any licenses to fish in New Zealand territorial waters after April 1. How do you react to that?

FUKADA: Well, unfortunately I`m not supposed to be discussing New Zealand- Japan relations here. We are discussing United States-Japan relations, so I wouldn`t like to comment on this New Zealand situation.

MacNEIL: I see. It just seemed that Mr. Muldoon was using this language to try and encourage the United States to use its clout even more, as I understand what he was saying. But perhaps you haven`t seen the reports of that press conference. What I`d like to know is -- to follow up on Jim`s question and ask all of you -- what moral justification does the United States have for pouncing on the Japanese, who have a much smaller economy, if they can make goods more efficiently than we can make them? Mr. Weil?

WEIL: To put it in moral terms is, I think, to put in on the wrong plane. I think the Japanese should be commended for having seen and seized a great market opportunity, in the case of television sets, for example. On the other hand, almost any supplier to any large market, if they seize an opportunity and bullet all of their strength and resources towards that one opportunity, can probably -- particularly if they have the support of their entire economic system -- take great advantage. Now, I think that the American consumer obviously benefits by the excellent Japanese television sets, though they are not that much cheaper than American sets. We see that in Japanese automobiles and in other, European made, automobiles. So I think that it becomes a series of trade-offs, where we have to be concerned not only about our consumers, which we are concerned about, but as well we have to be concerned about the American workers. And when we get, in this very open economy that we have, these mountaintops of great advantage to the foreigners, who are solving some of their domestic problems by exporting to us, we have to be concerned about the effect on American workers. Now, this can be characterized and viewed as protectionist; on the other hand, I think what we`re trying to do during this period of worldwide slump, where these problems tend to come out and be more exaggerated, is to take some tactical steps of retreat to avoid more serious, more permanent protectionist steps.

MacNEIL: I see. You`ve covered these for a long time, this negotiation and the general situation, Mr. Mullaney; is it your impression that the United States is getting, to put it baldly, more protectionist?

MULLANEY: Well, there are certainly pressures in certain areas of the country, in some business circles and, I suppose, in some political circles, for more protectionist stands. However, I hope that that does not evolve because the important thing here is that two countries -- the United States and Japan are sitting down, have been sitting down all year, to try to work out these problems on a mutually agreeable basis, and that`s what we have to hope happens because we do need to stifle protectionist sentiment, not only here but throughout the world; we do need a freer flow of trade, and anything that is done to try to ensure that is to the benefit of the whole world.

MacNEIL: Mr. McClenahen, do you see the protectionist sentiment in this country being stifled by this administration?

McCLENAHEN: Robin, I think they`re trying very hard to stifle it. I`m not sure that there is any one sure measure that will ensure that it is in fact stifled. I think one of the larger questions here is that economic interdependence is such a reality that no one nation can contain all its domestic economic successes and wall out all the international economic problems.

MacNEIL: Do you mean that`s what Japan`s been doing?

McCLENAHEN: To a certain extent. I think Japan is very proud of saying that it is very western, in the sense that it has a mature economy. At the same time, Japan has a lot of protectionist trappings of a developing country, and I think what we`re seeing in the current discussions between the United States and Japan is negotiation over some of those specific protectionist trappings.

MacNEIL: Let`s give the Japanese gentleman with us, Mr. Fukada, the last word. Do you agree with that, that what is involved here is Japan getting rid of its protectionist trappings?

FUKADA: Well, again, I`m sorry to be contradicting what you are telling me, but I don`t think it`s that simple. You see, we have problems in Japan, problems facing the United States, problems facing the other countries of the world, and the real problem is that the people are really struggling to achieve a reasonable amount of economic growth. And in order to attain this goal we have to do many things. It involves, certainly, some restrictions over imports; it involves the (unintelligible) tie of negotiations; it involves the facilitation of the trade, especially the import of manufactured products, in the case of the United States. We have to do many things.

MacNEIL: We have to leave it there, Mr. Fukada; sorry to interrupt you.

Thank you; thank you, Mr. Weil; and thank all of you. Good night, Jim.

LEHRER: Good night, Robin.

MacNEIL: And good night, Mr. Mullaney. Jim Lehrer and I will be back tomorrow night. I`m Robert MacNeil. Good night.