Word: auto
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Some truisms: peace is better than war. Any increase in sales of U.S. goods to foreigners is preferable to none. A door to Japanese markets pushed open a crack beats one slammed shut. So the auto-and-parts agreement concluded by U.S. and Japanese negotiators in Geneva last week, just barely in time to head off a possible transpacific trade war, looks beneficial to both sides...
...auto pact kept the peace -- for now -- largely because, in the grand tradition of U.S.-Japanese trade settlements, it left Washington and Tokyo ample room to quarrel about just what it was they had agreed to. Clinton enthused, "This agreement is specific. It is measurable. It will achieve real, concrete results." In Tokyo, however, Hisashi Hosokawa, a hard-line miti official, insisted that "this agreement is a rejection of numerical targets" for Japanese purchases of American cars and parts. His boss, miti Minister Ryutaro Hashimoto, may have strengthened his already bright chances for becoming Japan's next Prime Minister...
...facts tend to support the Japanese in this argument. The auto deal between the two governments contains no hard numbers. Kantor and Clinton have pointed to a few anyway: 1,000 more Japanese dealers selling American cars in five years; a prospective increase of $9 billion in three years-or roughly 50%-in sales of U.S.-made auto parts to Japanese buyers. These are American estimates of what will happen if Japanese carmakers carry out pledges they supposedly made "voluntarily" and which are additionally subject to changing business conditions. But Hashimoto has made it clear that the Tokyo government does...
...breaking point. In particular, they believed the U.S. must always keep its markets open, whatever its trading partners did--partly out of free-trade principle, partly as a way to reward anticommunist allies. Japan, for its part, grew expert at offering just enough--for example, "voluntary" quotas on auto exports in the early 1980s--to keep the U.S. grumpily mollified, while backing Washington all the way in world diplomacy...
...trade war this summer? Probably not. The reasons are reminiscent, in a minor key, of why war gamers always thought the U.S. and the Soviet Union would not get into a deliberate nuclear exchange: the consequences would be too awful to contemplate. The Japanese could shut down the U.S. auto industry, which is dependent on some Japanese parts like alternators. By dumping the U.S. Treasury bonds they have bought heavily, the Japanese could also drive up American interest rates disastrously. The U.S., by clamping down hard on the $119 billion of Japanese exports it buys every year, could drastically deepen...