Sino-US Trade Friction Differs from Japan-US Trade War in the Last Century

By Jiang Feng

US President Trump’s recent trade war threat against China triggered global economic turmoil and has become the biggest threat to the world economic order. US trade wars are nothing new. The United States has repeatedly initiated trade sanctions towards those it considers “disobedient countries” and Japan was one of them.

In the years following the Second World War, as a large number of Japanese products entered the American market, Japan, which had gone on to become a political ally of the United States, began to experience fierce trade friction with the United States.

The “301” provision was first invoked in 1989 against Japan by US Trade Representative Office.

In 1994 the United States reactivated the super 301 provision, imposing punitive tariffs on Japanese products entering into the United States.

Therefore, some scholars have compared Trump’s use of section 301 against China with the trade war between Japan and the United States in the last century, and sought to find an effective solution to the problem.

However, the trade disputes between China and the United States and the trade war between Japan and the United States in the last century are very different in various respects.

Different Roots

First, the current Sino-U.S. trade friction and the Japanese-U.S. war have different roots.

In the 1980s, Japan’s manufacturing industry was at its peak. The trade surplus with the United States exceeded 50 billion U.S. dollars. At that time, the United States had not yet gained an overwhelming advantage in the areas of high technology, finance, and services. In addition, the US economy had suffered a lot in Cold War, resulting in an urgent need to support its own manufacturing industry. In addition to the rust belt in the Midwest, industrial and commercial centers in the north and east were also under tremendous competitive pressure. As a result, Congressmen from these regions put huge pressure on Congress advocating trade protection and forced the Reagan administration to launch America’s first trade sanctions against Japan since the Second World War in 1987.

And then, in the following year, the U.S. Congress overwhelmingly passed the 1988 Comprehensive Trade Act, which included the super 301 against Japan, and formed a broad policy foundation in Congress.

Suffice it to say that the war was a bottom-up “national trade war” against Japan.

As to the Sino-U.S. trade war, in contrast to Trump’s vehement personal claims, voices in the U.S. Congress, the media, and the business community have expressed strong opposition. The American Soybean Association even released a television advertisement asking Trump to abandon trade protectionism. Many multinational corporations such as Apple, Wal-Mart and Boeing also expressed their concerns through various means. US investors also complained bitterly about the stock market crash.

It is clear that the Sino-U.S. trade war is Trump’s personal trade war” in a sense, and it does not enjoy the same popular support as the conflict between U.S. and Japan in the last century.

Fundamental Difference in National Relations

Second, there is a fundamental difference between the Sino-U.S. trade war and the Japan-US trade friction in terms of national relationships. China has greater confidence than Japan in its ability to withstand a trade war.

Since Japan is politically and militarily attached to the United States, it has always based its national policy on the Japan-US alliance, including policies on trade. When the United States initiated trade sanctions, Japan dared not use the GATT or other mechanisms to protect itself, and had no choice but to compromise for the benefit of its wider interests.

In the 1970s, the U.S. government even tried to impose sanctions against Japan under Article 232 of the Trade Law against Enemy Countries, generating angry opposition among the Japanese people. In the end, the Japanese government silenced its own domestic public opinion and quickly reached a US-Japan Textile Trade Agreement in 1972.

In the 1980s, the United States asked Japan to revalue the Japanese yen to reduce its trade deficit with Japan. In 1985, the Japanese government agreed to yen revaluation to meet the U.S. requirement, which eventually caused the stagnation that has blighted the Japanese economy for two decades.

In contrast, China immediately responded to the United States with sanctions of its own. This is totally a tit for tat struggle.

Different International Environments

Finally, there is a substantial difference in the international environment now and during the Japan-US trade war.

In the 1980s, although Japan had become the second largest economy in the world, it had long relied on the United States for trade and lacked a multilateral trading system.

As early as 1955, when the United States helped Japan to join the GATT, Europe adopted a discriminatory trade policy against Japan. From 1975 to 1980, Japan’s trade surplus with the EC rapidly expanded from US$2.3 billion to US$8.9 billion, triggering strong unease in Europe. For a time, the “Japanese economic threat” theory prevailed in Europe. As a result, Europe followed the United States lead in imposing sanctions on Japan.

In this Sino-U.S. trade war, the EU has urged Trump to abide by the rules of world trade and not to impede the global economic recovery, and has taken tough measures to deal with any trade war that the United States may launch against the EU.

It is clear that Trump is fighting this Sino-U.S. trade war alone. Not only has he failed to win the support of his European allies, he may even be subject to the EU duress.

Therefore, the Sino-U.S. trade war is completely different from the Japan-U.S. trade war of the last century in terms of the U.S. domestic situation, the relations between the two countries, and the international environment.

In this Sino-U.S. trade war China, as an important defender of the international order in free trade, not only occupies the moral high ground, but also has something to over to most countries and enterprises around the world. As the old saying goes, the just cause enjoys abundant support. China has gained much help from the rest of the world and will not become the next Japan.

 

Jiang Feng, Editor-in-Chief of JNOCNEWS and Editor-in-Chief of People’s Daily Overseas Edition Japan Monthly

Editor: Cai Hairuo

Opinion articles reflect the views of their authors, not necessarily those of China Focus