Why can't the U.S. be more like Japan? And vice versa? Those were the questions underlying much of the discussion at trade talks between the two nations in Washington last week. In some cases the medicine prescribed was far too bitter to swallow. If Japanese negotiators had their way, for instance, American consumers would curb their use of credit cards, lose the deduction on home mortgages and pay a stiff new gasoline tax. For its part, the U.S. wanted Tokyo to make it easier for large department stores to set up shop in Japanese cities, to boost public spending, to crack down on Japanese price-fixing and bid-rigging practices, and to shorten the workweek of Japanese employees to five days by eliminating half-day Saturday shifts. The ambitious talks were part of the Structural Impediments Initiative launched by President George Bush last May, which seeks to make fundamental economic changes in the two countries in order to reduce the $49 billion U.S. trade deficit with Japan.
The two-day talks stretched to four, and ultimately Japan agreed to far- reaching reforms that would open Japanese markets more widely than ever before to American business. At the same time the U.S. vowed to take steps to improve the competitiveness of American industry. President Bush praised Japan's recently elected Prime Minister Toshiki Kaifu for showing "true leadership," noting that "in one month we have had real success."
Among other concessions, Japan promised to lessen the power of tiny shops to obstruct the opening of new department stores that could stock larger amounts of foreign wares. It presently takes up to ten years for a store opening to be approved; Tokyo said it would shorten the process to about a year. Japan also pledged stiffer antitrust penalties for companies that rig bids to freeze out foreign suppliers. Moreover, Tokyo vowed to increase government spending on public works such as airports, roads and sewers. Besides creating business opportunities for U.S. contractors, such projects would facilitate the flow of imported goods to Japanese retailers.
In return, the Bush Administration largely restated its previous pledges to encourage Americans to save and invest more of their earnings. Washington once again stressed its determination to cut the U.S. budget deficit, to improve American education and to upgrade the work force. Much like the Japanese promises, the vague U.S. statements made little mention of how the goals would be accomplished. Nonetheless, U.S. Trade Representative Carla Hills commended the "progress and hard work on both sides." Hills called the deal "the most ambitious effort we've seen from the Japanese. It constitutes a clear blueprint for reform."
Congressional leaders, who have threatened tough trade sanctions against Japan unless it opens its markets further, greeted the Japanese pledges with practiced caution. Said Texas Democrat Lloyd Bentsen, chairman of the Senate Finance Committee: "Put me down as a skeptic who has seen too many agreements in which the results don't match the rhetoric." Many lawmakers are withholding judgment until they can see signs that the agreement is benefiting U.S. companies. Observed Senator John Danforth of Missouri: "In any commercial agreement with Japan, seeing is believing."