THE DAILY YOMIURI - February 4, 1999

Paralysis in U.S.-Japan Policy

by Steven C. Clemons

Two years ago, in U.S. President Bill Clinton's State of the Union address, Japan received not a single mention during 90 minutes of remarks.   Kasumigaseki was devastated. Japan received one reference last year and, on Jan. 19 this year, was upgraded to two utterances.

While some may celebrate that the United States is no longer engaged in "Japan-passing," the references in the Clinton address only punctuate the return of the classic U.S.-Japan policy paralysis in Washington. With trade tensions beginning to boil, U.S.-Japan defense guideline legislation now in play, and Prime Minister Keizo Obuchi's Golden Week state visit to Washington planned just after Chinese Premier Zhu Rongji's April meetings with Clinton, the sound and fury of U.S.-Japan relations will be at a high pitch, though, unfortunately, nothing in the relationship is likely to change.

Clinton's first reference to Japan in this year's speech to Congress was a warning to the government that, if the gravity-defying surge in steel exports to the United States does not decline, "America will respond." In the second reference, he paid homage to the U.S. Defense Department by mentioning the importance of "maintaining our alliance with Japan, with (South) Korea, and engaging China."

So, defense versus trade is back. No one could have presented better the classic tug-and-pull that has stymied those who want a coherent Japan strategy that furthers overall U.S. national interests. The policy team assembled in the Clinton White House has never been able to walk a straight line in U.S.-Japan affairs, and, while promising a post-Cold War reordering of the United States' economic and security priorities, Clinton's advisers have allowed inertia to be the primary driver of the U.S.-Japan relationship.

The current drama over Japan policy is best represented by the interests of the Pentagon, on one hand, and the Office of the U.S. Trade Representative (USTR) on the other. Over the past two years, the Defense Department has worked hard to push Japan to partner the United States on a research program for, and eventual deployment of, a theater missile defense system (TMD), as well as the adoption of new U.S.-Japan joint defense guidelines, last modified in 1978. Both the guidelines clarifying Japan's role in rear-support of U.S. forces, and TMD research have become highly controversial policy issues in Japan. Nonetheless, in the wake of August's missile launch test by North Korea and questions about stability in Northeast Asia, as well as potential unrest in Indonesia and other parts of the Asia-Pacific region due to repercussions from the continuing financial crisis, the Pentagon's top priority in Asia has been to secure Japanese passage of legislation upgrading support of U.S. forces when engaged in conflict.  Obuchi's hope has been to move the guidelines legislation through the Diet before his state visit to the United States.

On the other hand, the USTR is back in the news, reinstituting Super 301 and Title VII trade authority by executive order of the president. Super 301 authority, which expired in 1997, allows the USTR to specify an inventory of trading practices it deems unfairly confronts U.S. exports, and to generate corrective actions, including economic sanctions, to redress the balance.  Title VII authority, which previously expired in 1996, allows the USTR to confront discriminatory foreign "government" practices.

While the world was reeling from capital panic attacks, convulsing equities markets and plummeting currency values, particularly in Southeast Asia, the macroeconomic team in the White House, led primarily by U.S. Treasury Secretary Robert Rubin and his deputy, Lawrence Summers, prevented the pursuit of the USTR's microeconomic or sectoral trade agenda. In addition, the president's former chief of staff, Erskine Bowles, an investment banker by trade, tended to tilt influence in the Cabinet to the Treasury Department's concerns during the economic crisis.

However, at the end of October, Bowles stepped down, and John Podesta, a former U.S. Senate Agriculture Committee staffer who understands well the give-and-take required to maintain relations with congressional members and who is much more comfortable with a sectoral or microeconomic agenda became White House chief of staff. Podesta knows that the White House must tread carefully with members of Congress during Clinton's impeachment trial, particularly with Sen. Robert Byrd, and Sen. Jay Rockefeller, both Democrats of West Virginia, a major steel-producing state.

Although there is no explicit linkage between the president's recent statements about Japan's steel exports and his trial, none should miss the nuance of Byrd offering the motion to dismiss the president's case from the Senate.   Rockefeller has also been a critically important, longtime ally of the president, playing an important role on the Senate Finance Committee, which has jurisdiction over trade issues. Their demands that the White House take action to stem Japanese steel dumping in U.S. markets could not go ignored and finally compelled the resurrection of Super 301 trade authority.

Because many perceive that Japan's high levels of exports into U.S. markets crowd out other Asian nations' exports--vital to those nations' ability to restore economic growth--Japan is often perceived as being part of Southeast Asia's economic problem, rather than contributing to the solution.  In other words, many in U.S. government circles view Southeast Asia's access to U.S. consumers to be as important, if not more so, than the International Monetary Fund's bailout packages. Japan should be helpful during these economically tense times, finding ways to generate growth internally, rather than through exports, and should become an engine of consumption for other Asian nations. Thus, there is little sympathy for Japan's floundering economic circumstances in Washington these days, and very few oppose U.S. Trade Representative Charlene Barshefsky's tough tactics at this point.

By March 31, the USTR must specify in its annual National Trade Estimates Report a comprehensive listing of trade barriers facing U.S. products and services around the world. A good chunk of that list will come from Japan.  By April 30, the USTR will report to U.S. Congress which foreign trade practices, if corrected, will have the greatest positive impact on U.S. export levels.  The USTR must also report on discriminatory government procurement practices by April 30. There is little doubt that Japanese steel exports are one of the targets of the USTR, but other sectoral frustrations over flat glass, insurance and government procurement may also get targeted attention. As a consequence, when Golden Week begins on April 29, Obuchi may have to respond to a flurry of trade agenda items, despite having thought that the focus of his trip would be the U.S.-Japan mutual defense arrangement.

The flurry of trade activity notwithstanding, the White House still will have in hand absolutely no "Japan plan" and, consequently, will be driven by ad hoc decision making, responding to pressures as they emerge. The USTR's headlines are possible not because there is overwhelming support for return of Super 301 as leverage for fair trade, but mostly because the president has a trial in progress and the White House cannot afford to alienate its friends in the Senate who want action against unfair trade and dumping in U.S. markets.  The Treasury's ability to veto action because of macroeconomic concerns is minimized because U.S. markets look healthy and stable.

Soon, however, the trial will end, the White House's need for each single senator will diminish, and vexing foreign affairs issues will begin to multiply, just prior to the back-to-back visits of the Chinese and Japanese premiers.   In March, the president must certify to Congress whether or not North Korea has been cooperative and is living up to its responsibilities in the four-party talks and the arrangements with the Korean Peninsula Energy Development Organization. No one really knows what will unfold in the next two months over North Korea policy, but tension levels are certain to rise, not only in Washington, but also in Tokyo, Seoul and Beijing. U.S. National Security Adviser Sandy Berger and U.S. Defense Secretary William Cohen will underscore the importance of low levels of tension with both China and Japan, to assist in containing the North Korea problem.  Furthermore, the Diet may implicitly tie progress on the U.S.-Japan joint defense guidelines to some resolution of threatened trade tensions.

Japan has been ridiculed for decades for not having a more developed sense of its national interests and for not pursuing its own foreign policy.   Nothing could be farther from the truth. Japan knows that the United States wants its bases in Okinawa and on Japan's main islands, and Tokyo uses the leverage brilliantly to keep the United States from going too far in its economic demands. Japan's price for subordinating its defense decisions and interests to the United States is immunity from severe pressure on economic concessions.

Meanwhile, the U.S. Defense Department vigorously clings to its Cold War assets in Asia and does a good job of warning White House decision makers that West Virginia steel workers are a small price to pay in exchange for the defense assets Japan provides.

Until the United States decides that its economic interests have primacy, and until it is resolved to abandon a defense architecture designed for the Cold War and let Japan develop an independent security posture, U.S. trade policy will only generate minor fits of thunder. Real accomplishments will be few.