Rising Sam - failure of Bill Clinton to take stronger action against Japan's trade policies - Editorial

National Review, March 7, 1994

IS THE Japanese economy the yellow peril imagined by Ross Perot and James Fallows, with keiretsu taking the place of carriers? Or is it an autarchic lion, which can be bullied to lie down with the free-trade lamb? President Clinton's recent confrontation with Prime Minister Hosokawa shows the Clinton Administration thinks it's a bit of both.

Jim Kolbe (see p. 54) analyzes the Japanese system and the ways by which it has hitherto maintained its trade barricades. Japanese protectionism is less the result of specific trade regulations than of the comprehensive regulation of the economy as a whole. Only when shareholders demand real returns on their investments, will Japanese companies abandon the system of sweetheart deals among themselves which shuts out the more economical goods and services of foreign competitors.

The collapse of the Japanese stock market was a warning that Japan could not indefinitely defy economic gravity. Hosokawa rose to power by recognizing that reality. Instead of encouraging him in the direction of macro reform, however, the Clinton Administration has focused on product-by-product trade targets, threatening sanctions if they are not met. The only thing new about the Clinton strategy is its bumptiousness. It still focusses on the same old numbers--so many cars, so many widgets--which have bedevilled previous Administrations.

At a time when Japan Inc. is facing the need for a major restructuring, Washington is squabbling with the mail-order department.