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U.S.-Japan Trade Rift Looms Over G-7 Meet

By Laura Garza, Militant, Vol.59, no.25, 26 June 1995

As representatives of imperialist powers gather in Halifax, Nova Scotia, for a meeting of the Group of Seven - the governments of Britain, Canada, France, Germany, Italy, Japan, and the United States - the trade dispute between Tokyo and Washington is evidence that diverging interests, not common goals and policies, will more and more mark the exchanges among these capitalist powers.

We're not going to blink, said Mickey Kantor, the U.S. government's trade representative, referring to the Clinton administration's decision to enact stiff sanctions on luxury car imports from Japan if Tokyo does not agree to U.S. demands by the June 28 deadline.

Tokyo is breaking with a pattern of eventually giving in to U.S. demands, refusing to buckle under pressure to import more U.S.-made cars and car parts. Capitalists in Japan recognize that they are in for rough times. Since 1992 Japan has been in a recession, the longest and deepest since World War II, and no significant upturn is in sight.

Japan's employing class faces a growing banking crisis. The ministry of finance recently admitted banks are carrying problem loans totaling $474 billion, the equivalent of more than 8 percent of Japan's total economic output last year. No Japanese bank has failed since World War II, but this is being openly discussed as a possibility today.

In the 1980s banks made generous loans to those who fueled a speculative burst in land prices. But today real estate prices in Tokyo are at 50 percent of their 1991 peak and still falling. The bad loans are piling up and there is little sympathy among workers and the middle classes for the idea of bailing out the landlords and bankers with public funds.

Life-time employment coming apart Japan's much touted pledge of life-time employment is also coming apart, as companies embark on the inevitable course of trying to drive down wages, while increasing production with fewer workers.

While companies have not yet implemented massive layoffs, many are cutting back. Some are shifting production to other Asian countries where labor and other costs are lower. Unemployment now stands at 3.2 percent, with anyone who has worked an hour in the last week of a given month being counted as fully employed.

The bleak economic outlook has bolstered the determination of Japan's business barons not to give in to U.S. capitalist dictates. The U.S. government has cases involving Kodak and Federal Express in line after the auto parts dispute.

Washington gets little support The Clinton administration's strong-arm tactics are gaining little sympathy elsewhere. From Asia to Europe, government representatives fret openly about the dangerous precedent that would be set, and the impact it could have on their trade relations, if Washington succeeds in forcing Japan to accede to its demands.

The European Union has condemned the U.S. government decision to unilaterally enact sanctions. The auto bosses in Europe fear their sales could suffer if Japan is forced to buy U.S. parts. The European Union also took advantage of the dispute to get Japan to ease some restrictions on importing cars from Europe.

Meanwhile, as the U.S. government tries to portray the trade dispute as a self-contained element in an otherwise stable and amicable relationship with Japan, Tokyo announced it's refusal to go along with the U.S. embargo against Iran. Japan receives 400,000 barrels of oil a day from Iran. The Japanese government also provides one of the few sources of credit and financing for Tehran. Last month, under U.S. pressure, Tokyo suspended payment destined for a dam project, though they stressed the deal was not canceled.

As the tariffs deadline approaches, fear of possible retaliation by Tokyo and a spiraling dispute has some capitalist spokespeople pushing for a resolution before going to the brink.

This seems to us an especially dangerous time and place to experiment with trade-closing devices, warned the Wall Street Journal editors.