U.S.-Japanese Trade Relations: Some Reflections, Autumn, 1977

Trade relations between Japan and the United States are becoming increasingly difficult as are trade relations between Japan and most industrialized countries. Last year, Japan ran a $9.9 billion trade surplus with the world, and forecasts for this year are that the figure may swell to $15 billion. By contrast, the forecast for the United States this year is that it might run a deficit of some $25 to $30 billion. The forecast for the bilateral balance between the United States and Japan is that it may amount to a $5 billion surplus for Japan. At present, Japan has 70 percent of its imports in raw materials and 95 percent of its exports in manufactured goods, compared to 32 percent of imports for the United States in raw materials and 72 percent of U.S. exports in manufactured goods. It is vitally important that the Japanese Government exercise leadership in encouraging the import of manufactured goods. Differences in wage rates have been a cause of the problems in trade with Japan, but as the Japanese wage rates rise, Taiwan, Korea, Hong Kong, and Singapore have taken Japan's place as low-wage sources of manufactures. Differences in the modernness of plant layout and equipment are also a significant part of the problem. However, while this is a key statistic for the Japanese Government in developing tax policy, the United States has no information on this critical factor in competitive performance. In addition, far less time is lost in work stoppages in Japan than in the United States.