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Trade Disaster Deferred
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HAVING PULLED America back from the brink of a disastrous trade war with the Japanese, the Clinton administration deserves at least faint praise for its last-minute lack of commitment to principle.

All along, Clinton’s trade negotiators had demanded that the Japanese government pledge its private companies and individual consumers to specific “numerical goals and timetables” for the increased purchase of American goods, and all along, Tokyo had rightly resisted such “international affirmative action.” Hours before America’s deadline, the Clintonites folded, accepting the fig leaf of vague and unspecific promises to do more. In this case, no principle was far better than a bad principle.

Just last year, Clinton rightfully invested enormous political capital in enacting major bipartisan free-trade agreements culminating in GATT, a measure vital to the world economy. Now, just months after GATT’s ratification, his administration threatened to impose unilateral trade sanctions against Japan, a blatant violation of the treaty. Nearly every major nation—including many which have experienced severe trade friction with Japan—stood against America on this point. If the U.S. can appoint itself judge, jury and executioner in its trade disputes and violate newly signed treaties at will, then American contracts are not worth the paper they are printed on, and our system of international trade will falter and collapse, endangering much of our prosperity.

Clinton’s assumption that the Japanese government would agree to numerical quotas in consumer purchasing was implausible from the beginning. Imagine how Americans would react to a French demand that our government commit its citizens to drinking a specific number of bottles of French wine each year. Even the old state-run economies of Eastern Europe would have had difficulty enforcing such an agreement. Furthermore, Japan currently stands at the brink of financial collapse, with its banks holding between $400 and $1 trillion of bad loans on their books. Faced with such a disaster, no Japanese government could allow itself to be seen as meekly bowing to unreasonable foreign economic demands and remain in office.

CLINTON’S MOTIVES were readily apparent. Free trade is good economics, but often bad politics, and threatening trade sanctions marks the beginning of his reelection campaign as surely as his recent purchase of television advertising time. The remaining big industrial trade unions represent one of the few surviving constituencies of the Democratic Party, although on this issue, the leading Republican presidential contenders were no better, uniformly praising Clinton’s trade toughness with an eye toward winning the protectionist primary voters of Ohio and Michigan.

Our own state’s fragile economic recovery would certainly have become the first casualty of any trade war, and not merely because of the hundreds of thousands of Californians employed by Japanese corporations or our $13 billion in exports to Japan. Despite the recent hard times brought about by cutbacks in defense spending, our state heavily dominates the world’s most successful growth industries such as computer hardware and software, telecommunications, biotechnology, and entertainment.

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But the products which these industries produce are largely information-based, conditioning their marketing success upon international agreements on copyrights, trademarks and licenses, such as were incorporated into the recent GATT agreements. If the U.S. can blithely violate sections of GATT in order to protect a declining automobile industry, other nations will soon do the same to protect national industries with a far brighter economic future.

And there lies the great tragedy of current American trade policy. America today is absolutely dominant in nearly all the leading industries and technologies of tomorrow, but our own national self-doubt keeps us from admitting the fact of our economic victory. Our world dominance in crucial growth sectors is arguably far greater now than it was even during the peak of American optimism in 1965, when the fragmentation of world markets meant that viable foreign competitors always existed in the leading-edge industries of that era.

Today, America stands alone. Despite receiving billions of dollars in misdirected government subsidies, Japanese computer manufacturers are facing annihilation in their home market at the hands of aggressive American imports. Bill Gates of Microsoft is a figure of legend to Japanese school children, perhaps a greater hero in Kyoto than in Kansas. And East to West and North to South, popular culture everywhere—for good or for ill—is shaped by images produced in Hollywood, by Americans for Americans.

IN 1990, before vote-mongering blurred his common sense, a staunch Reaganite Republican wrote: “Among the great American achievements of the 20th century is free Asia, democratic and capitalist, which arose out of the ashes of World War II and KoreaŠTo squander that in an absurd ‘trade war’ because we cannot compete with Korean cars or Japanese computer chips would be an act of almost terminal stupidity for the West.”

Pat Buchanan was right then, and he is wrong today, as are all the other politicians, Democrat or Republican, who refused to stand firm against the economic idiocy of the Clinton administration. The universal assumption that one side or the other will always eventually back down and avert catastrophe mirrors the confident brinksmanship of Europe’s leaders in 1914, just before the war that nearly destroyed European civilization. Played over time, a game of economic Russian roulette has but one certain outcome, and it is always fatal.

(Republished from The Sacramento Bee by permission of author or representative)
 
• Category: Economics • Tags: Trade 
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