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May 29, 1989

Action at the "301" Corral

A case had been ably made by the late 1960s --- notably by Carl Oglesby, among others --- that the underlying reason the Vietnam War was fought was to control Japanese trade. Beyond the U.S.'s zeal to implant a clear-cut line of containment in Asia, these arguments contend, was the implicit U.S. concern that Japan --- ever the willing trader --- would be pulled out of our orbit and subsumed by the regional dictates of a nuclear-capable China. Accordingly, the strategic objective of the war was to frustrate the geographical proximity of China and Japan by diverting Japanese trade southward throughout Southeast Asia. Vietnam, with its long coastline, was deemed the gateway to the region, and with the bloody addition of Indonesia a year earlier to the West's secure ledger of Australia, Malaysia, Thailand, and the Philippines, it increasingly became the linchpin upon which we would firm up the southerly alternative to the Chinese market we were offering the Japanese.

By the logic of these propositions, and in light of the magnitude of current U.S.-Japanese trade, the U.S. emerged from Vietnam a winner; in turn, what truths can be gleaned from such a strict economic interpretation of that war provide an ironic backdrop for viewing much recent U.S. economic behavior. With specific reference to the "Super 301" provision of the Omnibus Trade Act --- and its designation of Japan as an "unfair trader" --- such a "victory" has a definite Pyrrhic look two decades later. We now find ourselves struggling to avoid innundation as a result of having successfully kept Japanese trade within our orbit, and as the first of a series of "structural impediment" talks with Japan begin this month, whatever remains of once-hallowed American imperial muscle will be summoned to try and stave off the coalescing effects of a quarter-century of U.S. economic decline.

The Bush administration's long-awaited strategic review of U.S. foreign policy has been completed, and the strategy the administration seems set to employ against Japan has much of the big stick tenor of the Reagan-Bush years, however much it may have backed away from the latter's unilateral virulence. The Reagan crowd were quite forthcoming about their tactics; economic recovery was paramount, and the hope was that the military buildup generated in response to a carefully-renewed demonization of the Soviet Union would be the means by which recalcitrant economic partners would fall in line behind our protective umbrella and become more malleable. With the advent of Gorbachev's peace offensive, however, the European Community shows unmistakable signs of slipping its Atlanticist moorings, and the Japanese have evinced considerable interest in the Soviets' increasing trade overtures.

Having failed to restore U.S. hegemony under Reagan, the U.S. has awakened to a world hurtling toward competing economic blocs, and suddenly finds itself something of an economic stepchild. Poised midway between Asia and Europe, and dependent upon both, the Bush administration's task will be to finesse an agenda among competing parties which guarantees that we will remain a major global player. Given the more pressing demands of our relationship with the Japanese, they appear to have become the primary focus of a U.S. two-front thrust. Ultimately, the objective is the unified Europe of 1992 and our ability to compete with it, with the realization that U.S. hopes for success against that bloc's looming formidability are limited if we go against it alone. The ongoing fear across-the-board in Washington has been that U.S. access to the EC's markets would be stymied by the specter of "Fortress Europe" invincibility. In a best-case scenario --- an open and deregulated single market fashioned in the image of Thatcherism --- the U.S. would still face increasingly stringent European quality-control standards. In a more circumscribed configuration with substantial Left impact --- one prefigured, perhaps, by the European Parliament gains in June by the Socialists and Greens --- there would be the added concerns of environmental overview, state subsidies, trade union reentrenchment and other filaments of pan-European nativist sentiment. The prospect of either scenario has seemingly prompted the administration's conclusion that our prospects in Europe are greatly enhanced in a tandem approach with the Japanese, while without the latter we face the possibility of increasing economic isolation. The strongest indication of that policy choice came during Secretary Baker's recent Asian tour, where the groundwork for integrating the dollar and yen blocs in a trans-Pacific strategy was clearly laid. It was an admission that the open, multilateral trading system inaugurated at Bretton Woods is on shaky legs, while at the same time it pointed toward a U.S.-Pacific pact as the means by which the ideals of Bretton Woods can yet be salvaged. Lately, the administration has heard a ready chorus of voices bolstering that paradoxical contention. Recent assertions along those lines by such geoeconomic realpolitikers as Zbigniew Brzezinski and Edward Luttwak, coupled with the voluble center-stage presence of Bill Bradley during the floor fight on behalf of the FSX fighter and the calls for a new partnership with Japan by a sizable bipartisan congressional contingent, evidence a groundswell of support for the administration's belief that U.S. interests require that some semblance of the oft-mentioned economic "condominium" of America and Japan materialize. The administration's utilization of the Super 301 provision --- a timely and necessary sop to the Gephardt-led "managed trade" adherents and growing public xenophobia toward Japan --- appears to be the first phase of that tactical approach.

It is instructive to note that the preliminary formal accusation in late April that Japan has erected significant trade barriers against U.S. products came the same day the decision was made to proceed with the FSX. The symbolism of the FSX joint-venture is crucial: a carryover remnant of Reagan's tenure, its newest incarnation under Bush's tutelage is aimed at reenforcing the concept of our strategic interdependence in the Pacific as a means of prompting Japan to reappraise its unbalanced trade behavior. Anticipating Gorbachev's visit to China and the prospect that Japan might be viewing the dimunition of the Soviet threat in the region as an opportunity to end-run the American shield and further loosen our check on their economic activity, the FSX decision not surprisingly coincided with Vice President Quayle's 12-day tour of Southeast Asia. The joint-production aspect of the plane made it easier for Quayle to allay the uneasiness of Asian leaders about a remilitarized Japan even as he pitched those leaders on additional defense responsibilities Japan should assume in the region. His trip --- a reconnoitering prelude to Baker's visit --- was meant to relay a clear message: With Japan's emergence as a world economic power come certain responsibilities. For the Bush administration, the assumption by Japan of a shared role in power-projection in Asia, albeit scaled-down, would hopefully tend to act as a natural brake on their economic excesses.

In the wake of the massacre in Beijing, the regional burden-sharing role of Japan and the attendant economic reconsiderations we would have it undergo become even more pronounced. The renegotiated FSX deal, cut so as to protect U.S. civil aviation predominance while ensuring a windfall for U.S. military "spin out" applications, also helps provide something of an opportune addendum/recontouring of the U.S.'s China card, locking in the Japanese in the near term and making them chary of supplying the Soviets any future military technology transfers à la the Toshiba milling machine contretemps of a couple of years ago. Indeed, post-Beijing and the call that slaughter has generated for more severe U.S. sanctions, the Japanese suddenly find themselves walking point on the Pacific Rim, necessitating the maturation to fill whatever vacuum may arise should the crackdown grow more grotesque and Bush be forced to act beyond his status-quo-plus affinities. Given their history in Asia and the volume of investment and credits already in place, the Japanese are not likely to exacerbate long-remembered tensions by pulling out of China. From the U.S.'s perspective, this "event-driven" need for Japan to tread carefully around its adjacent neighbor offers a ready-made diplomatic surrogacy and also may an incipient wedge between Li Peng and the possibility of more strengthened Chinese ties with the Soviets. Moreover, as the Japanese look to more stable Asian markets for new business ventures in the immediate future, their designation as a Super 301-targeted country will require heretofore uncalled-upon probity on their part in order that their economic momentum not reawaken old regional memories. Their recent announcement of a plan to reduce Third World debt should be viewed as a precautionary step to ensure that market access not be burdened by residual grudges.

All of which stands to serve U.S. purposes and helps facilitate our entrance into the new European market. The supplementary, long-range purpose of the 301 "hit list" was clearly intended to kindle reverberations in Western Europe. In effect, it was meant to be utilized as an essential ingredient in our two-front approach, subtly putting the EC on warning as it singled out Japan. By intensifying the concerns of the EC about freewheeling Japanese penetration and the imminent Japanese "investment diaspora" of the 1990s, it also implied how the impact of that situation might be lessened. Having left the EC off Super 301 at the last minute, and cognizant of the new restrictions the EC is placing on Japanese goods shipped from the U.S. but without enough "local input" to qualify as American (read: "screwdriver" factories), the U.S. hinted at an arrangement which would mutually benefit us and our European trading partners vis-a-vis the Japanese. Long-standing European economic aversion to Japan would cause the EC to look the other way as we skirted GATT in favor of biceps-flexing bilateral negotiations with Japan. Such a move would more quickly ameliorate existing U.S.-Japanese trade imbalances, and the desired results of that power play --- more American products flowing into Japan and the likelihood of increasingly more U.S.-Japanese joint ventures and American leveraged buyout activity in Japan --- would set the initial tone in our efforts toward effecting a freshly chastened, reined-in Japan and in bringing them once again under our aegis, and would also begin to temper European fears. Concurrently, the U.S. promise that "when we open a market, we open it for everyone" --- in trade representative Carla Hills' incessantly repeated phrase of late --- would constitute our end of the quid pro quo with Europe. Such strategic brokering by the U.S. presumes that Europe will be mollified enough to accept a U.S.-modulated Japanese presence in exchange for European access to the Japanese market. Most important, the U.S. gains a foothold in the EC and disperses the avalanche of Japanese and East Asian imports to another external market.

To the face-saving Japanese who would ease our side-car into a competitive position in the new Europe --- publicly discomfited and lately saddled with considerable diplomatic concerns and LDP political disarray --- the implication we would have "301" spell out for them for the future can be readily deciphered: You are feared and disliked, however much other countries are reticent to say so overtly, and if you wish to do business in Europe --- which is where the coming action will be and where we have centuries-old influence --- it is in your best interests to come in under our wing and receive our imprimatur. You must demonstrate to a skeptical world through your dealings with us that you are capable of reciprocity.

---Copyright John Hutchison 1989

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