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As a first step, Japan must quickly take down the bamboo screen that blocks high-technology imports and foreign investment. Many Japanese industrialists tirelessly contend that their economy is an "adolescent" that needs protection against the big, rich, "mature" competitors of North America and Europe, but that argument clearly is not valid today. Japanese manufacturers also have an unnatural price advantage in world competition because their currency, the yen, is undervalued. Tokyo economists reluctantly concede that the yen must be revalued upward; there is likely to be a 5% revaluation within a year.
On the U.S. side, the prime requisite is to develop a coherent trade policy aimed at expanding the flow of world commerce and investment and protecting only those domestic industries that are necessary for the nation's economic or military security. As a painful corollary, the U.S. may have to permit some nonessential industries to be overwhelmed by foreign competition. Washington at present has no overall policy, but tries to tackle trade problems one by one as they pop up. A sensible step would be to accept the Japan Textile Federation's unilateral offer to restrict cloth shipments to the U.S. It is absurd for the U.S. and Japan to squabble fiercely over textiles, because that industry is not vital to the economy of either nation. Simultaneously, the U.S. could crack down harder on dumping in several industries, perhaps by flatly embargoing shipments, though it would be much wiser to do that on a company-by-company basis rather than by blanket rulings as in the TV case.
President Nixon's ability to develop a comprehensive policy is severely limited because he lacks legislative authority to negotiate new U.S. trade concessions in return for a lowering of foreign barriers. That authority expired in 1967; the Administration should demand that Congress renew it. Armed with such power, Nixon could call for a new world trade conference similar to the successful Kennedy Round of 1964-67, this time aimed at elimination of nontariff barriers to trade and investment. This conference would be an ideal forum in which to press the Japanese to remove their remaining restrictions. In return the U.S. should try to persuade European nations to wipe out their restrictions on Japanese goods.
The West's Turn to Copy
A mutual lowering of barriers will temporarily make Japanese competition more intense but also more equitable. Sooner or later Japan will have to temper its export drive because its economy is already operating under some severe strains. For one thing, the country is running out of labor. A decade ago, there were two job openings for each high school graduate; this spring there are 7.7. Japan has also bought export growth largely at the price of skimping on internal investment in housing, roads and pollution control. The country's industrial pollution is perhaps the world's worst. Says Nippon Steel's Nagano: "We need more roads, harbors, bridges, housing. People are living two families to a six-mat (9 ft. by 12 ft.) room. In