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Stiglitz defends administration's position on Japanese trade
STANFORD -- Emotions count as well as dollars and yen when American and Japanese leaders talk trade, economist Joseph Stiglitz said last week during a campus visit at the Center for Economic Policy Research.
"I can give you lots of anecdotes that explain why there is such intensity on this issue, why people in the administration and others feel so strongly," said the professor who has been on leave from Stanford since March 1993 to serve as a member of President Clinton's Council of Economic Advisers.
For example, he said, the Japanese government allegedly delayed the sale of financial derivatives with an investigation until Japanese firms were ready to market products similar to those sold by U.S. firms. It agreed in international trade negotiations completed last year to end its quota on rice imports but then, Stiglitz said, used its "monopoly power" in Japan's rice markets to insist that American rice be blended with lower quality rice from other countries.
"Americans who aren't rice eaters aren't sensitive to the quality of rice, but to people who eat rice, this is very important. . . . What they did basically was to try to ruin our reputation for rice, and that's the kind of trade practice that gets people's blood boiling. With things like that going on, it's hard to have a rational discussion."
Time and again over the last few decades, he said, the United States has negotiated freer trade with Japan, only to find that country responding by erecting non-tariff or "structural impediments." His own job at the Council of Economic Advisers, he said, includes such things as making sure that "the letter and the spirit" of trade agreements aren't undermined by domestic political forces through structural impediments written into treaty implementation legislation.
Stiglitz's box-lunch talk to a group of about 70 professors, students and local business people came two days before the United States and Japan signed an 11th-hour agreement to resolve their noisy fight over the Japanese auto industry's import and sales practices. Clinton had threatened to impose 100 percent tariffs on Japanese luxury cars, even though such a tariff violates the General Agreement on Tariffs and Trade.
Stiglitz's visit also came two days before Clinton promoted him to chair the Council of Economic Advisers and two days before a House subcommittee voted to wipe out funding for the agency that provides economic analysis of political issues to the president. One congressman was quoted as saying the president could get plenty of free economic advice from volunteers. But John Taylor, director of Stanford's Center for Economic Policy Research and a former member of the council in the Bush administration, told the San Francisco Chronicle that disbanding the council would be a "serious mistake. It gives objective economic advice in an environment where there's a lot of vested interests."
During his campus talk, Stiglitz emphasized efforts at his agency to reduce or redesign government regulations where it makes economic sense and stressed the relationship between Clinton's proposed education budget and two issues: improving economic growth and reversing the recent pattern of growing income inequality in the country.
His audience, however, kept asking him questions related to the Japanese-American trade dispute. Economist Ronald McKinnon, for example, asked if policymakers in Washington understood that the U.S. trade deficit with Japan is the result of the low value of the dollar against the yen, which, in turn, is the result of high Japanese savings rates and low rates in the United States.
"There is increasing sensitivity to the importance of savings" in Washington, Stiglitz responded, including a proposal in the president's budget to encourage people to save through individual retirement accounts. "I think all economists recognize that the overall balance of payments [between the United States and Japan] has to do with macroeconomic phenomena," he said, but he added, "these trade practices that I've described feed into a protectionist frenzy, and they do have an effect on the exchange rate. One of the reasons that the dollar is low against the yen is because of the protectionist policy that Japan has pursued."
Stiglitz said one reason he is "hopeful" that the United States would make progress, albeit slow progress, toward removing structural impediments to the sale of American goods in Japan is that Japanese consumers are beginning to realize that their government's policies negatively affect their standard of living. Awareness has grown, he said, through such recent successes as getting Toys R Us stores into Japan, where "consumers are finding out they can get goods more cheaply than they previously could" without foreign competition.
"I am hopeful about things working out better in these negotiations and about why these series of outbreaks will eventually have a positive effect in opening markets. It's still going to be a very long struggle," Stiglitz said.
McKinnon noted, however, that the United States has anti-dumping laws that the Japanese consider a structural trade barrier. The laws permit U.S. firms to file complaints against foreign companies, accusing them of "dumping" products on U.S. markets at below cost, if the country sells similar products at home for higher prices. Stiglitz claimed, however, that the Japanese aren't nearly as affected by those laws as they would be if there was not a provision in the U.S. law that requires the U.S. competitors to show they are injured by the so-called unfair competition. This means that successful concerns, like U.S. automakers, can't use the law to their advantage.
Stiglitz also said that free trade is one issue that seems to have bipartisan support in this country. The Clinton administration completed negotiations on the Uruguay Round of GATT and on the North American Free Trade Agreement that were begun by Republican administrations. Clinton, meanwhile, has begun negotiations on an Asian Pacific free trade agreement, setting goals of establishing free trade with all developed countries in that region by 2010 and with developing countries by 2020. He also held the "Summit of the Americas," which established the goal of achieving hemispheric free trade by the year 2005.
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