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International trade

Japan and US on Brink of Trade War Over Market Openness

Strategic Insights

— 1 min read

Japan's Prime Minister Morihiro Hosokawa has warned the US against imposing trade sanctions on Japan following the collapse of trade negotiations between the two nations. Hosokawa expressed his hope that the US would refrain from such measures, citing the General Agreement on Tariffs and Trade (GATT) rules. However, US officials have vowed to impose punitive measures on Japan, which has refused to accept US demands for more-open markets. The collapse of the talks has left the two countries poised for a trade war, with Japan threatening to retaliate against US products and the US considering unilateral trade sanctions.

Key Takeaways:

  • The US and Japan have been at odds over the issue of market openness, with the US demanding numerical targets for opening Japanese markets.
  • Japan has refused to accept such targets, citing concerns about "managed trade."
  • The collapse of the trade talks has left the two countries on the brink of a trade war, with both sides engaging in posturing and warning the other of potential retaliatory measures.
  • Japan has indicated that it will move to open its markets on its own, but will not drop its resistance to numerical targets.
  • US officials have vowed to impose punitive measures on Japan, including considerations of unilateral trade sanctions and the reinstatement of the Super 301 trade law.
  • The Super 301 trade law authorizes the President to identify countries that systematically discriminate against US goods, and could lead to trade sanctions if Japan does not respond by lowering trade barriers.

Statistics:

  • The US trade deficit with Japan is $60-billion (US).
  • The 31 previous trade agreements between the US and Japan have relied on Japanese promises instead of quantitative and qualitative measures.
  • The GATT rules allow a country to request a review by a panel of experts from countries not involved in the dispute, which can take months to complete.

Sources:

Reuters

Washington Post

Japan Times

General Agreement on Tariffs and Trade (GATT)

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