US-Japan conflict threatens trade

June 21, 1995

By Eva Cheng

In an ultimatum issued last month, the US threatened to charge a punitive tariff of 100% on 13 models of luxury Japanese cars, a move that would make these cars almost twice as expensive and strangle their sales. It will be enforced on June 28 if Japan has not given in by then to US demands to open up its market to US cars. Japan risks losing US$5.9 billion worth of exports.

The US, as a major buyer of Japanese products, holds a powerful natural bargaining position. The fact that it still resorted to high drama — even to the extent of damaging the credibility of the World Trade Organisation (WTO) — is a measure of its desperation.

US productive capacity is the highest in the world, churning out US$6.38 trillion worth of goods and services in 1993. It has produced much more than its increasingly impoverished working class can afford to buy. To maintain profitability, its capitalists need to sell some of the products overseas.

Japan has a similar need to export, probably greater. With an economy two-third the size of US (a GNP of US$3.92 trillion in 1993), Japan has a population only half as big.

The car war is a conflict between the two biggest imperialist economies of the world, at a time when both of them as well as the "world trade order" are in growing troubles. The recent sharp decline of the US dollar has once again thrown international trade into chaos because a large part of world trade is settled with this currency.

Japan has held a trade surplus with the US since the mid-1960s, based at least in part on protectionist practice. Cars and car parts account for a big part of it — 56% of Japan's record US$65.9 billion trade surplus with the US last year.

US-made cars claim only 1.5% of the Japanese market while Japanese cars have 24% of the US market. Japan exported $40.3 billion of automotive goods to the US last year, importing only $3.5 billion of similar goods from the US.

The US, trying to open the Japanese market more to US cars, has tried to prescribe numerical targets for Japan, such as the number of showrooms selling US cars and the extent to which Japanese car makers use US-made parts.

Foreign suppliers have found it hard to break into Japan because of intricate franchise deals. As a result, car makers and registered repairers favour Japanese suppliers while dealers favour Japanese car makers who, in many cases, own them. Yet these collusive practices are not unique to Japan. They are standard under monopoly capitalism as a means to extract super-profits. The US capitalists — including car makers — are no exception to this, though they do it in a different way. Consumers and workers suffer in all cases.

The Japanese capitalists do deals with one another not for patriotic solidarity, but for greater profits. The US car capitalists have not offered a profit big enough to attract adequate Japanese collaborators. Or their products are not competitive enough in price and design for the Japanese market.

US cars are almost universally too big for an energy-short country which has a practical need for small cars — having learned painful lessons from the oil crises in the 1970s — and where petrol still is relatively expensive. Some US car makers even tried to sell left-hand-drive cars in right-hand-drive Japan.

If other factors remain the same, being price competitive undermines profits. The US car makers seem to find state intervention — through lobbying the Clinton administration to pressure the Japanese government — a more reliable way to ensure profits.

Clinton's ultimatum seriously undermines the authority of the WTO, the First World-dominated world trade police body set up early this year under the GATT treaty to consolidate the First World's dominance of Third World markets. The move gives a clear measure of how seriously the US is prepared to take the body when it does not suit its needs.

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