Japan–United States Trade Friction: The Reciprocity Issue

Abstract

Trade friction between the United States and Japan has grown considerably since 1980, particularly over the sharp increase inJapanese automobile exports in 1981, and in 1982-83 over American demands that theJapanese market be opened wider to American exports.' The disastrous condition of the U.S. automobile industry in a deep recession has done much to fuel congressional and executive support for limitations on Japanese exports to protect the domestic industry and to seek ways to increase American exports toJapan. The sheer size of the trade deficit withJapan and the unusual depression of American industries have been seen to justify the demand for reciprocity-i.e., that the Japanese market be as open to American exports as the American one is toJapanese exports like automobiles, television sets, video tape recorders, and integrated circuits. The trade deficit withJapan in 1981 was $18.08 billion and made up 45.6% of the total U.S. deficit in merchandise trade of $39.7 billion.2 Until the mid-1960s when the American economy was so much stronger than Japan's, it was Japan that complained of deficits and burgeoning American exports toJapan. In the early 1970s when Japan had only a $1 billion trade surplus with the United States, it was taken to task severely by the Nixon administration, which eventually put a heavy import surcharge on allJapanese, Canadian, and European exports to force them to revalue their currencies and change the balance of trade with the United States. While accepting a trade deficit with Japan as normal nowadays, Treasury Secretary Donald Regan told the Tokyo Foreign Press Club that the very large size and rapid growth of Japan's trade surplus reflects an artificially distorted trading pattern.