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Apprehensive. Japan has been moving to dismantle its once awesome array of protectionist devices, but it still maintains quotas on computers, integrated circuits, leather goods and 24 categories of farm products. Tokyo government officials calculate that the agricultural quotas keep out $460 million worth of potential imports a year. Japanese exporters also get special aid —including low-cost loans and government-paid surveys of foreign markets —that American businessmen consider grossly unfair.
To many foreign officials, however, the new U.S. line on trade sounds like a nationalistic economic offensive. They are especially apprehensive about another move announced by Shultz: phasing out by the end of 1974 of three controls that the U.S. maintains on the movement of U.S. capital abroad. These are the 11 %% tax on Americans' purchases of foreign securities, restrictions on U.S. bank loans to foreigners, and limits on the number of dollars that American companies can send out of the U.S. to build factories overseas. Dropping these controls is a laudable, if somewhat risky step toward greater freedom for the international movement of money. But in the view of some European government officials, the combination of devaluation, tough talk on trade and removal of capital controls suggests that the U.S. aims to build a huge trade surplus that would give American businessmen more money to buy up foreign factories.
Wild as that idea may sound, it is a fair reflection of the heated emotions stirred by trade disputes, which bring up issues of politics, social priorities and national pride. Common Market officials, for example, think that their protectionist agricultural policy is necessary to avoid social disaster; European farmers must be subsidized heavily, they contend, to keep them from leaving the land and jamming into cities. The officials will be extremely reluctant to change that policy for the sake of raising the sales of American farmers.
In dealing with Japan, the U.S. aims at nothing less than a shift in that country's whole economic direction, from overwhelming stress on exports to emphasis on much-needed internal development. Many Japanese would like to see more of their country's resources devoted to building schools, roads and houses rather than to grinding out goods for export, but the conversion will be long and difficult. Meanwhile Japanese government officials and businessmen bitterly resent U.S. criticism of their huge trade surpluses, which they see as the reward for the high productivity and skilled salesmanship that American competitors often lack. Some go so far as to imply that the criticisms are tinged with racism. Trade negotiations consequently will at best be protracted, prickly, and haunted by a constant danger that they will lead not to more freedom for world commerce but to a new outburst of protectionism.