[Congressional Record Volume 140, Number 137 (Tuesday, September 27, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 27, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                E X T E N S I O N   O F   R E M A R K S


                SENDING A MESSAGE OF FREE TRADE TO JAPAN

                                 ______


                        HON. MICHAEL A. ANDREWS

                                of texas

                    in the house of representatives

                      Tuesday, September 27, 1994

  Mr. ANDREWS of Texas. Mr. Speaker, I am very concerned about an issue 
of great importance to myself and many Members of Congress: the trade 
deficit with our trading partner, Japan.
  This issue appears to be on-going and never-ending. Again, just last 
week, news of a 20-percent jump in the U.S. trade deficit sent the 
financial markets tumbling.
  While our trade imbalance and the sometime anticompetitive practices 
exhibited by Japan seem endless, a consistent approach and the will to 
achieve our goals is needed. All to often in the past, U.S. negotiators 
have threatened to take unilateral action, and in response, the 
Japanese pledge to conduct a study or review procurement practices or 
reexamine its competition laws. Unfortunately, whatever the pledge, an 
agreement to take specific action evaluated by measurable criteria 
never materializes.
  President Clinton and his trade negotiator, Ambassador Mickey Kantor, 
have worked diligently to break the cycle. The framework agreement 
reached last year insisted upon quantifiable criteria for measuring 
progress. Earlier this year, when the framework talks between the 
United States and Japan were not progressing, the President terminated 
the negotiations and Japan, threatened with sanctions in its cellular 
phone market, opened its closed market.
  Mr. Speaker, we find ourselves at the very same crossroads. The 
President has set September 30, 1994, as a deadline for initiating 
Super 301 investigations against Japan. I believe that the U.S. 
negotiators should send the same strong message they sent earlier this 
year. The goals of U.S. trade policy will only be achieved through 
diplomatic, strong, consistent, and credible action.
  Japan's closed flat-glass market provides the perfect case at this 
time for Super 301 action. Mr. Chairman, I have included an insightful 
editorial from the Washington Post which further explains the 
seriousness of a closed Japanese flat-glass market. Even though 
American flat-glass makers are globally competitive, with market shares 
approaching 25 percent in Europe and Latin America, the United States 
has less than 1 percent of Japan's $4.5 billion glass market. This 
minimal market share has continued to experience a year-to-year decline 
in absolute and percentage terms.
  Unfortunately, a cartel of three Japanese companies has divided the 
market for two decades, maintaining steady market shares in a 5-3-2 
ratio. Japan acknowledges the cartel, admitting in a Japan Fair Trade 
Commission report that there is a ``state of monopoly by three makers, 
pricing by consensus, and creation of sales networks of distribution by 
each maker.''
  Most importantly, Japan promised in a 1992 action plan signed by 
President Bush and Prime Minister Miyazawa to ``substantially increase 
market access for competitive foreign flat glass manufacturers.'' 
Regrettably, that promise has not been kept. Despite active bilateral 
negotiations, stretching over 2 years, Japan has failed to take 
meaningful action and remains in violation of our trade agreement.
  Mr. Speaker, this is a crucial time and I believe that the time has 
come for the administration to seriously consider using Super 301 to 
open Japan's flat-glass industry. In a time when the General Agreement 
on Tariffs and Trade is on very country's agenda, it is vitally 
important that the United States emphasize the importance of honoring 
trade agreements.
  Mr. Speaker, I urge the administration to send a clear message to the 
Japanese that unless they open their flat-glass market, the United 
States will initiate a Super 301 investigation.

                          Countdown With Japan

              [Clyde V. Prestowitz Jr. and Alan Tonelson]

       President Clinton has just moved to preserve his 
     credibility in Haiti, but his resolve is being challenged on 
     another front--continuing trade problems with Japan. At stake 
     here, however, is not only the president's reputation but 
     some of his best hopes for creating good jobs and sustaining 
     economic growth.
       The president has set a Sept. 30 deadline for deciding 
     whether United States and Japanese negotiators have made 
     adequate progress in opening up Japanese markets, or whether 
     the United States will have to take action to ensure that 
     U.S. companies are not disadvantaged in those markets.
       Powerful voices in Tokyo, in the media, on Wall Street and 
     even in his own administration want him to let the deadline 
     pass. They would rely on forces such as exchange rates and 
     Japanese reformers to solve the trade problems--whose 
     importance they generally pooh-pooh or dismiss altogether. 
     The portray any possible trade action--and indeed the 
     president's original decision to seek measurable results in 
     trade talks with Tokyo--as scapegoating Japan for our own 
     home-grown economic problems and as thinly disguised 
     protectionism. And they blame the administration's flirtation 
     with ``managed trade'' for the dollar's recent problems.
       But these arguments blame the victim, ignore the serious 
     costs imposed on the U.S. and world economies by Japanese 
     protectionism and forget the keys to successful negotiating. 
     They should be ignored.
       President Clinton instead needs to remember that he and all 
     his recent predecessors here tried negotiating the reduction 
     of Japanese trade barriers because for decades they have 
     unjustifiably hurt not only American companies and workers 
     but their Asian and European counterparts as well. They have 
     limited job creation, depressed wages and prevented highly 
     competitive non-Japanese businesses from realizing economies 
     of scale and amortizing investments.
       These costs are much higher than most economists recognize; 
     a recent study by the Economic Strategy Institute shows that 
     Japan's barriers are depressing U.S. exports by $50 billion 
     annually, preventing the creation of as many as a million 
     jobs and depressing world economic output by $400 billion a 
     year.
       The president needs to remember that the traditional 
     approaches to Japanese trade issues have had no discernible 
     effect on the trade balance. Not even the yen's dramatic rise 
     since 1985 has helped. In fact, the currency markets' 
     reaction to the latest monthly trade figures shows that the 
     continuing deficits, and not the president's trade policy, 
     are largely responsible for exchange rate volatility and the 
     weakening of the dollar. How else can the markets react to 
     the prospect of huge current account imbalances with no end 
     in sight?
       More sobering, American industry's remarkable across-the-
     board competitive comeback in recent years hasn't affected 
     the trade balance either. American goods have never had 
     bigger price advantage in Japan, and as all economists agree, 
     their quality has not compared as well for many years. yet 
     the bilateral deficit this year threatens to break $60 
     billion--a new record.
       The president should remember that he has a strong case to 
     make. Indeed, although autos and auto parts still account for 
     most of the deficit, he can make many strong cases. Take the 
     flat glass industry. The $4.5 billion Japanese market is the 
     world's second largest. Japanese production costs in this 
     capital-intensive industry are kept among the world's highest 
     by traditionally high energy costs. And Japan has lagged in 
     developing and using technologically advanced glass products 
     like insulating glass, laminated safety glass, and high-
     performance glass coatings. U.S. and European firms dominate 
     these product areas.
       Yet, in 1993, glass imports accounted for just 3 percent of 
     the Japanese market--a level much lower than in any 
     industrialized country. The main reason: Japan's market is a 
     cartel, divided among three major Japanese producers who have 
     held virtually constant share for 20 years and have tightly 
     controlled distribution channels.
       The president also must remember that, whether in trade 
     policy or private business, negotiating endlessly without 
     specifying consequences for noncompliance and without 
     following through usually leads nowhere and destroys 
     credibility in the process. The rest of the world, moreover, 
     is watching. If the United States simply accepts Japanese 
     intransigence, how will it succeed in opening markets in 
     China--whose surplus with America will approach $25 billion 
     this year--or in other mercantilist countries?
       Finally, the president should keep in mind that the 
     Japanese themselves have agreed to seek trade solutions that 
     can be measured in some way.
       Of course, the president has many options for responding to 
     Japanese barriers other than those afforded by the 301 or 
     Title VII sections of U.S. trade laws. He could emulate the 
     French and force all Japanese products to enter the country 
     through a single customs house. He could emulate the Japanese 
     themselves and require their products to undergo the same 
     Mickey Mouse inspections to which American products sold in 
     Japan are subjected.
       The stand-patters rightly argue that such practices are 
     neither ``legal'' or ``transparent'' and thus patently 
     unfair. But they object to the president's legal remedies as 
     well. They should simply admit that they don't care about 
     solving America's Japan trade problem.
       The president, however, has to care. If negotiations do not 
     succeed, he will have no choice but to use the remedies 
     provided by U.S. trade laws. Far from representing 
     protectionism, these measures seek to open foreign markets by 
     dealing directly with barriers to access. He should focus on 
     the most egregious problems--cartelized industries, 
     controlled distribution systems and unfair government 
     procurement practices. If the United States won't press such 
     open-and-shut cases, what economic interests will we defend? 
     How can we maintain the value of our currency and the 
     stability of financial markets if we allow U.S. industry to 
     compete under disadvantageous conditions? And what kind of 
     message will we be sending to the rest of the world?

                          ____________________