Challenge and Counter-Challenge (US-Japan Trade Relation) An Old and Rare Book

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PARAMA SEN has been a research Scholar from the Centre for American Studies, School of International Studies, Jawaharlal Nehru University. New Delhi, She was earlier educated from Loreto House and Lady Brabourne College, Calcutta. In addition to being a researcher, she is a good singer and also has penchant for fine arts. The present book is her first venture in writing. She has future plans for working on a bigger volume dealing with Japan USA and the Asia-Pacific region.

The book proposes to examine the causes and factors that brought about the changed perceptions in the US policy responses towards Japanese trade challenges in the 1980s.

The first chapter deals with the history and origin of the conflict. An attempt has been made to trace the trade relations between US and Japan from the post-World War II period till the late 1960s.

In the second chapter, an effort has been made to study the dynamics of the policy-making processes involving the Presidency, the US Congress, the United States Trade Representative and an attempt has also been made to trace the source of conflict by studying the tension areas or the several trade disputes between the US and Japan from early seventies and throughout the Reagan administration.

The third chapter deals with the impact of labour, business groups media and public opinion on US trade-policy making processes vis-a- vis Japan in the 1980s.

The subsequent chapter deals with the negotiations and settlements reached in the different cases of trade disputes, the obstacles faced therein and the lessons learnt. In the concluding chapter, an overall assessment of President Reagan's trade policies vis-a-vis Japan has been attempted.

I wish to sincerely thank Dr. K. P. Vijayalakshmi of JNU, New Delhi, Prof. R. P. Kaushik, Chairperson, Centre for American and West European Studies (CAWES), School of International Studies (SIS), JNU, New Delhi, Shri O. P. Mishra, Chairperson of the Department of International Relations, Jadavpur University, Calcutta, and Dr. Asim Chowdhury of Charu Chandra College, Calcutta, for guiding and inspiring me through this book. They have constantly provided me with the impetus and momentum to work perfectly and improve on all handicaps. Their comments and suggestions have gone on to give this book its present Shape.

The immense love and encouragement provided by my parents and my grandmother enabled me to carry myself in good spirits through this book.

Japan's status as America's biggest economic competitor was to a large extent America's own creation. After the Second World War, America deliberately kept the value of the yen low so as to induce Japanese exports and gave Japan open access to the American markets. American technology transfers gave Japan the boost into consumer electronics and the American defence umbrella for over forty years allowed Japan to concentrate it's resources into developing its economy. These factors, coupled with a great deal of industriousness and ingenuity on the part of the Japanese resulted in its stupendous economic transformation. By 1983, Japan's per capita income of $19,200 had surpassed the U.S. per capita income of $18,200. By 1985, Japan had the largest capital reserves in the world with over $90 billion in gold and foreign currency, which was double the level of 1990. At the same time, a business survey conducted, listed one Japanese Bank among the top ten banks in the world. However, by 1992, seven of the top ten banks were found to be Japanese. Four of the biggest securities firms in the world were Japanese in ownership. The claim of Nomura Securities as having had a pretax profit of $4.1 billion in 1987, was twenty times more than that shown by Merrill Lynch, America's largest security firm. This clearly points to the substantial strides the Japanese made in their economic growth. In the recent years, Japan has become the world's largest exporter of capital as well as the largest creditor nation with net foreign assets of more than $300 million. In the second half of the 1980's, Japanese foreign direct investment (FDI) had expanded on a much larger scale, with its substance also going through a major change. The annual amount of Japan's direct investment outflows, which was about $8.6 billion on the average during the first half of the 1980s, rose rapidly to $22.3 billion in 1988, and went much above $70 billion in 1990. Thus, total FDI during the four-year period of 1986-90 exceeded the total amount from all previous year combined. Japan emerged as the most active-direct investor country in the world economy.