Emergence of economic gridlock

The U.S.–Japanese trade relationship is based on a number of deep-rooted economic, social, and political fundamentals that are extremely difficult to change. On the surface, however, the relationship can be affected by actual or threatened political actions and by changes in financial markets. Recently, for example, the yen rose 30% against the dollar in a little more than three months, and this rise took the urgency out of the effort in 1985 by the U.S. Congress to protect American industry and jobs from Japanese competition. But the basic fundamentals that underlie the U.S.–Japanese trade relationship continue, only partly affected by the sudden increase in the value of the yen. Japan is a manufacturing nation, and it must export its goods. America has been unable, or unwilling, to produce comparable goods at competitive prices so it imports Japanese goods. We have run an increasing trade deficit with Japan for a long time. Trade frictions have existed between us throughout this period–periodically reaching hysterical levels in the United States when all sorts of responsible citizens call for drastic action. There is an equivalent hysteria that develops in Japan as people there resent American interference in their affairs and constant charges of unfair trade practices. Then, after lots of storming about, the exchange rate changes or other temporary concessions are made and things cool off for a while, only to be repeated in a year or two. This has been our basic trade relationship with Japan in a nutshell. It has not changed very much for nearly 20 years.