Managed or Mismanaged Trade? US-Japan Trade Relations During the Clinton Presidency

Abstract

Trade between the United States (US) and Japan provides the world economy with its most important bilateral trade relationship. In 1996, 27.2 per cent of Japan’s exports and 22.7 per cent of its imports were accounted for by trade with the US, its most important trading partner. The bilateral trade relationship has also been the most politically sensitive, not least since the US recorded a $10 billion trade deficit with Japan in 1978. Between 1974 and 1989 no fewer than 24 of the 40 trade disputes in the Pacific addressed by US 301 trade measures involved action against Japan (Ryan, 1995, p. 342). In 1996, the US recorded deficits in both its trade balance ($83.6 billion) and its current account ($65.8 billion) with Japan. An earlier influential US commentator responded to this imbalance by suggesting that the US trade negotiating strategy had amounted to nothing less than the surrender by the US of its future prosperity (Prestowitz, 1988). In the face of US demands for corrective action, at least one Japanese politician (Ishihara, 1991) advocated a more assertive negotiating stance, whilst another (Ozawa, 1994) later suggested that nothing short of a Japanese political revolution would be sufficient to ensure a harmonious bilateral relationship in future. This chapter seeks to analyse the conduct of this vital and politically sensitive bilateral trade relationship during the Presidency of Bill Clinton. The chapter begins by analysing the broader global, regional and domestic context for trade relations during the 1990s. It then focuses upon the Clinton administration’s trade policy inheritance before suggesting 210that the July 1993 United States-Japan Framework for a New Economic Partnership and the June 1995 US-Japan automobile dispute constituted the two most important landmarks during Clinton’s first term of office. The chapter concludes by analysing the prospects for trade relations with Japan during Clinton’s second term.