Japan Agrees to Slice the Surplus

A promising accord on trade and quotas

The Japanese have long striven to export much and import little, a practice that reached its zenith last year in an awesome trade surplus of $15 billion. Since more than half that surplus was at the expense of the U.S., and since protectionist sentiment on Capitol Hill has swelled, the Administration has been pressing the Japanese to change their cherished habits, hard as that may be.

Last month Nobuhiko Ushiba, Japan's new Minister for External Economic Affairs, visited Washington with an armload of trade-equalization proposals. Nice try, said Robert Strauss, President Carter's Special Trade Representative, but not quite nice enough (TIME, Dec. 26). After Ushiba went back to Japan, he was followed by a platoon of U.S. negotiators headed by Alan Wolff, Strauss's hard-knuckled deputy. Late last week Strauss himself flew to Tokyo to sign a U.S.-Jap-anese agreement that covered virtually every point in the festering trade dispute. Beamed Strauss: "The Japanese side was much more cooperative than I had earlier thought possible."

If all goes well, Japan's surplus could be reduced to zero by 1980. In accepting the principle of equilibrium in trade accounts--and indeed even a trade deficit, should it arise--the Japanese, said Strauss, had adopted a "change in direction and philosophy." The joint communique contained a smorgasbord of policy accords, some weighty, others primarily symbolic, designed to right the present unbalance. The Japanese reiterated an earlier pledge to increase consumption at home by boosting their domestic growth rate to 7% in fiscal 1978. This month the Diet will begin debate on a $140 billion budget that includes a $45 billion deficit. Approval is virtually certain. Tokyo also promised to cut tariffs on $2 billion worth of goods, effective April 1, and to work toward further tariff reductions at the GATT trade talks, which resume in Geneva later this month. Quotas will be lifted for twelve agricultural products as well as anthracite coal, and other quotas will be liberalized: the high-quality beef limit goes from 3,000 to 10,000 tons, oranges from 15,000 to 45,000 tons. Though in dollar terms these agricultural concessions will have scant impact on the lopsided trade figures, they represent a willingness by Tokyo to placate the U.S. even over the protests of Japanese farmers. The Japanese pledged to increase their imports of manufactured goods and to sit down periodically with the Americans to determine whether enough progress has been made. They did not agree--as Wolff and his team had wanted--to substantial duty reductions for computers and color film.

Tokyo also made some important gestures unrelated to tariffs and quotas. The Japanese will expand credit lines to importers, consider more foreign bids for government procurements, and dispatch missions to the U.S. to scout purchasing possibilities in electric and nuclear power plants and forest products. For its part, the U.S. promised to lessen its trade deficit by reducing its dependence on foreign oil. Strauss called the agreement "a major breakthrough in our relations with Japan"--which was no overstatement, considering the fact that relations between the two countries had seldom been so strained since V-J day.

For the benefit of Congress, Strauss added a realistic caveat. The pact, he said, "is not the whole book," but merely "a promising first chapter" that does not mean "17 million jobs back home or even 17 jobs." Indeed, as a top Treasury Department economist put it, "even in the best light, this week's accord can only be dubbed an overdue start in correcting Japan's crazy way of trading." When Congress reconvenes this week, the White House will doubtless ballyhoo the Strauss mission to fend off high-tariff advocates on the Hill. In the end, though, only hard numbers in the U.S.'s trade ledger will be persuasive. As Oklahoma's Democratic Congressman James Jones warned last week on his return from a trip to Japan: "Last year I would have said one-third of Congress could be called protectionist. This year it's close to a majority."

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