US-China Trade Conflict: Dejavu or New One Lessons From US-Japan Trade Conflict in 1980s and 1990s Tamotsu Nakamura & Yoichi Matsubayashi
Plan of Talk 1. US-Japan Trade Conflict in Retrospect 2. Similarities Between 1980s/90s and 2018 3. Differences Between 1980s/90s and 2018 4. Lessons From US-Japan Trade Conflict in 1980s 5. Summary 2
External (Trade) Imbalances:1985 Germany US Saudi Arabia Australia Canada Italy India Greece Surplus Countries 1 Japan 2 Saudi Arabia Denmark Egypt Indonesia Venezuela Qatar Netherlands Kuwait Mexico Deficit Countries 1 US 2 Switzerland United Arab Emirates Taiwan Province of China Germany Japan -140-120 -100-80 -60-40 -20 0 20 40 60 3
1. US-Japan Trade Conflict in Retrospect US Trade Partners Having Surplus (1985) Korea BEA Brazil Italy Mexico Hong Kong Germany Taiwan Canada Japan 0 5 10 15 20 25 30 35 40 45 50 Billion dollar
1. US-Japan Trade Conflict in Retrospect (80s & 90s) 5 4 3 Plaza Agreement Japan U.S. Structural Impediments Initiative(SII) US-Japan Comprehensive Economic Council 2 1 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995-1 -2 Voluntary Export Restrictions on Japanese Cars Exported to US Super 301 of Trade Act to Semiconductor Industry Acceptance of Strong dollar by Rubin (US secretary of Treasury)
External (Trade) Imbalances:2016 Algeria (Japan Korea Netherland etc) UK US UK Canada Australia Saudi Arabia Turkey Mexico Indonesia Russia Italy Singapore Switzerland Netherland Taiwan Korea Japan China Germany -600-500 -400-300 -200-100 0 100 200 300 400 Surplus Countries 1 Germany 2 China 3 Advanced countries Deficit Countries 1 US 2 6
US Trade Partners Having Surplus(2017) France Taiwan BEA Korea Canada India Italy Germany Japan Mexico China 0 50 100 150 200 250 300 350 400 Billion dollar
1. Similarities (1) Two Countries World Share of GDP About 40%
2. Similarities (2) LOW Trade Dependency Lower Than 40%
2. Similarities (3) Peak-out in Trade Surplus (Japan) Trade balance in Japan(percentage of GDP) % UN
2. Similarities (3) Peak-out in Trade Surplus (China) Trade balance in China (percentage of GDP) % 8 6 4 2 0-2 -4-6 1980 1985 1990 1995 2000 2005 2010 2015 UN
Comparisons: Behavior of Trade Surplus (USA) 0-1 -2-3 -4-5 -6 1980 1985 1990 1995 2000 2005 2010 2015 UN
Comparisons: Behavior of Trade Surplus (Germany) 10 8 6 4 2 0-2 -4-6 1980 1985 1990 1995 2000 2005 2010 2015 UN
Comparisons: Behavior of Trade Surplus (France) 4 3 2 1 0-1 -2-3 1980 1985 1990 1995 2000 2005 2010 2015 UN
2. Similarities (4) Rapid Aging (Japan) Driving Force of Decline in Trade Surplus
2. Similarities (4) Rapid Aging (China) Driving Force of Decline in Trade Surplus
Comparisons: Pace of Aging (USA)
Comparisons: Pace of Aging (Germany)
Comparisons: Pace of Aging (France)
2. Similarities Should be Emphasized 1. Two Countries Share in World GDP 40% 2. Three Countries Less Dependent on Trade 3. Peak in Trade Surplus During Conflict Periods For Japan and China 4. Start of Rapid Aging for Japan and China
3. Differences (1) Real or Nominal Threat? Allies (Partners) or Antagonists (Opponents)? Japan is a Partner to USA Most Japanese Believe, But Converse is??? Why US Republicans Soft to Japan in Trade? Because of China?? China is Superpower Both in Economy & Military.
3. Differences (1) Real or Nominal Threat? China Will Overtake US in GDP Sooner!!
3. Differences (1) Real or Nominal Threat? Under Same Rules or Different Rules Is Competition Fair? In Particular, Innovations or Intellectual Property Rights US and Japan Compete Under Same Rules How About China and US?
3. Differences (1) Real or Nominal Threat? China Already Overtook US? Innovations 松林さん 1400000 Number of Patents 1200000 1000000 800000 600000 400000 200000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 China US Japan WIPO
3. Differences (1) Real or Nominal Threat? Under Same Rules or Different Rules Which is More Important? Trade Deficits * US President Looking at this Deal? or Innovation Race * Vital Role in Long-Run and Military Strength
3. Differences (2) Policy Instruments in US-Japan Conflict 5 4 3 Plaza Accord Japan U.S. Structural Impediments Initiative(SII) US-Japan Comprehensive Economic Council 2 1 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995-1 -2 Voluntary Export Restrictions on Japanese Cars Exported to US Super 301 of Trade Act to Semiconductor Industry Acceptance of Strong dollar by Rubin (US secretary of Treasury)
In 2010s Tariffs, Sanctions, Safeguards & Series of Retaliations?? 3. Differences (2) Policy Instruments (Coordinations or Battles) In 1980s and 1990s Plaza Accord Exchange Rate Adjustments Macro Policy Coordination Structural Impediments Initiative
3. Differences (3) Long and Complicated Supply Chains In 1980s and 1990s Not Many Industrialized Economies Short and Simple Supply Chains Consequences are Predictable In 2010s Long and Complicated Supply Chains Consequences are Unpredictable Cut Your Own Body with Your Own Sword!!
3. Differences Should be Emphasized 1. Japan Was NOT Real Threat to US China Can Be!! 2. Coordination V.S. Fights or Battles 3. Supply Chains Short and Simple Predictable Long and Complicated Consequences are Unpredictable
4. Lessons (1) Macro or Micro? Trade Deficits CANNOT Be Solved By Trade Policies (Battles) 1. Domestic Problem Watch Out!! Even US Aging Rapidly Trade Deficits in US Increasing Further US on Journey in Searching New Trade Enemies Germany, Japan China Which is Next? 2.Macroeconomic Coordinations & Structural Reforms May Help But Cannot Solove!!
US s Never-Ending Journey in Searching Enemies 0-1 -2-3 -4-5 -6 1980 1985 1990 1995 2000 2005 2010 2015 UN
Japan Has to Start Searching and Finding Enemies??? Japan Has and Continue to Have Trade Deficits % UN
Because of Irreversiblity Slow Recovery from Recession (Lost Decades) 4. Lessons (2) Uncetainties and Irreversibilities Uncertainties DO Matter Only When Irreversibilities Exist In 1980s and 1990s, Uncertainties in Trade & Exchange Rates Overseas Shift of Production in Japan (Hollowing-Out)
4. Lessons (2) Uncetainties and Irreversibilities In Case of US-Japan Trade Conflict, Japanese Moved to Asia For Production In Case of US-China Conflict, Many Advanced Economies Invest in China Not Only for Production But for Market Purpose Uncertainties FDI to China for Production (China Economic Growth ) However, China is Still Attractive as Market!!
4. Lessons (3) Size Does Matter In 1980s and 1990s, East Asia was Enough to Accommodate Japan In 2020s and Later Asia will NOT be Enough to Accommodate China and India!! Watch Out!! Not Only One Belt, One Road Initiative But Also China s Penetration to Africa (Close to Europa)
4. Lessons (3) Size Does Matter Do You Remember What Happened Unfortunately, I Forgot it! On 5th of October in 1971? PRC Became a Member Not Only of United Nations But Also of Security Council! Who Supported PRC(People Republic of China)? African Nations!! Irreversible Relationship Between Africa & China
4. Lessons (3) Size Does Matter China s Penetration to Africa billion dollar 90 Africa s Imports From 80 70 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 China Germany France US UN
4. Lessons (3) Size Does Matter China s Penetration to Africa 0.6 Africa's Import from China/Africa's Import from EU15 0.5 0.4 0.3 0.2 0.1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
4. Lessons Should be Emphasized 1. Trade Deficits is Domestic Problem CANNOT Be Solved By Trade Policies (Battles) 2. Uncetainties together with Irreversibilities Compound the Problems 3. Watch Out What Happening Behind the Conflict!!
5. Summary On September 26th, US and Japan Agreed to Enter For Negotiating TAG (=Trade Agreement on Goods) (Joint Statement of the United States and Japan) US 1. Bilateral Negotiation 2. Tariff Reduction Win-Win? (TAG= Trump Abe Good?) Japan To Avoid 1. US-JAPAN FTA 2. Tariff Hike on Cars
5. Summary Japanese Side Emphasizes For Market Access, Japan s Previous Economic Partnership Agreements Constitute Maximum Level EU-Japan Economic Partnership Agreement (EPA) is an Important Negotiation Asset Hopefully, Use It a Bargaining Chip in Negotiation with!!
5. Summary Main Surplus Country 1980 90s 2010s Japan (Japan) China (Germany) Main Deficit Country US US Trade Friction Period U.S Administrations About 15 years? (Forever?) Reagan(Rep) Bush(Rep) Clinton(Dem) Trump(Rep) 42
5. Summary 1980 90s 2010s Policy Macroeconomic Policies Trade policy Backgrounds of End of Trade Friction Surplus Country Deficit Country Exchange Rate Adjustment(?) Macroeconomic Policy Coordination(?) Individual Negotiation Comprehensive Negotiation Japan's Economic Growth Slowdown US Economic Growth Recovery? China's Economic Growth Slowdown? US Economic Growth Slowdown? 43
Thank You Very Much for Your Attention!!