Trade | |
OPEN SKIES AND FREE TRADE WITH JAPAN |
On August 15, Northwest Airlines published a full-page ad in the Washington
Post asserting that Japan will "say and do anything" to keep its
$54 billion trade surplus with the United States. In particular, Northwest
accused Japan of opposing "open skies," which would allow free
access by American and Japanese airlines to both Japan and the U.S. While there is a good case for deregulating U.S.-Japan airline transportation,
the Northwest ad incorrectly implies that Japan's trade surplus is solely
the result of unfair trade practices and uses misleading data to make its
point. To start, the $54 billion number is a forecast for 1997.
Thus the overall deficit with Japan, including trade in both goods and
services, was just $27.7 billion in 1996, about half the number used by
Northwest. And this figure has been falling even more rapidly than the
merchandise trade deficit. In 1994, the deficit on goods and services was
$51.7 billion and in 1995 it was $41.1 billion. Looking specifically at trade in airline services, there is even less
for Northwest to complain about. In 1996, the U.S. "exported"
$6.2 billion worth of airline passenger fares to Japan, while "importing"
just $700 million, for a surplus of $5.5 billion. This means that the vast
bulk of passenger traffic between the U.S. and Japan currently travels on
U.S.-flag carriers such as Northwest. The truth is that Japan's trade prowess has been waning for years. According
to the Organization for Economic Cooperation and Development, Japan's export
performance has fallen every year since 1986. As a result, Japan's share
of world merchandise exports has declined from 10.2 percent in 1986 to just
8 percent last year. Japan's world trade surplus in goods has been reduced
from $139.3 billion in 1993 to $83.6 billion last year, and its world deficit
in services has risen from $41.9 billion in 1991 to $62.2 billion in 1996.
In fact, Japan has run a deficit in services trade continuously since the
1970s. By contrast, U.S. exports have been strong, making America the world's
number one exporter, with 11.8 percent of world exports in 1996. We had
a surplus of $73.5 billion in services. In any case, economists now believe that macroeconomic influences --
such as exchange rates, relative economic growth rates and saving rates
-- account for virtually all of the U.S.-Japan trade deficit. As a recent
International Monetary Fund study put it, there is "near unanimity
among economists" that such factors explain most of the variation in
current account balances. This means that Japan's trade practices have
almost nothing to do with its trade surplus. So it is not surprising that
a study by the Institute for International Economics found that elimination
of all Japanese trade barriers would raise U.S. exports to Japan by no more
than $6 billion. All of this is not to defend Japan's trade policies. Japan does practice
protectionism and it should stop; not for our benefit, but for its own.
Protectionism raises the cost of living in Japan and makes its people worse
off. That is why Japan should support market-opening measures such as the
"open skies" agreement. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis,
August 20, 1997. |