Trade battle may substitute one insanity for another

PUBLISHED : Thursday, 17 February, 1994, 12:00am
UPDATED : Thursday, 17 February, 1994, 12:00am

AS US Trade Representative Mickey Kantor fired a salvo warning of a US-Japan trade war, he brilliantly illustrated both why conflict is inevitable and the grave dangers inherent in any such confrontation.

The gung-ho spirit in the White House last Friday was palpable as a senior administration official - almost certainly Mr Kantor himself - briefed the press following the failure of the summit between US President Bill Clinton and Japanese Prime Minister Morihiro Hosokowa to reach any agreement on the burning issue of trade.

The official said: ''What you saw today was the ending of the former United States policy of trade insanity, repeat, insanity - that is, doing the same thing over and over again and expecting a different result.

''Today represents a clear break with the past. Before, we would accept cosmetic agreements. The status quo is unacceptable. There's no more business as usual with Japan in trade. This is a turning point in our trade relationship.

''We have been prepared [with] quite a menu. We will proceed promptly, responsibly and carefully. We will insist that the Japanese market, which is out of step with the rest of the world in terms of being closed, be opened up.'' Few wars have ever been so precisely defined at their outbreak, and Mr Kantor followed up on Tuesday as he announced the first battleground.

His choice, cellular phones, illustrates past trade insanity in several ways.

First, US products have no difficulty selling and getting a sizeable market share everywhere - except in Japan.

Second, the US has sought to overcome these difficulties with not one agreement, but three, to ''open up'' the market.

Third, no sooner has one problem been solved than more crop up. With every agreement, the US expected improvement but did not get it.

Fourth, the Japanese opened themselves to charges of duplicity as they criticised the leading US cellular phone manufacturer, Motorola, for making mistakes that the Japanese Government itself forced upon Motorola.

Thus, in the heavily populated Tokyo-Nagoya corridor, home of nearly half Japan's population, Motorola was forced by Japanese bureaucrats to take a Japanese firm as its partner - even though that firm was already primarily beholden to Motorola's Japanesecompetitor, NEC.

Given this background, Motorola complained of its treatment under Section 1377 of the US trade laws.

Now Mr Kantor has announced that the US will impose sanctions ''on selected Japanese products'' after 30 days, saying this is ''a classic case of the determination of Japan to keep its market closed''.

But if the Clinton administration places punitive tariffs on Japanese cellular phones in the US, American workers will lose their jobs, since most Japanese manufacturers of the phones make them in the US, too.

Before the 30 days are up, Mr Kantor will have to determine whether or not this item should be struck from his war ''menu'', since Motorola's Tokyo partner, shrewdly reading the writing on the American wall, last week announced plans to invest heavily inmaking Motorola phones more accessible for Japanese consumers.

So, immediately before the trade war's first skirmish is fought, the American aggressors are reminded that it is never easy to break with the past.

The US and Japanese economies are so heavily inter-linked and interdependent that it will be extremely easy for the ''generals'' on either side to shoot themselves, and their countries, in the foot.

In this trade war, one form of insanity could easily be replaced by another.