A Costly Trade Victory over Japan

AS he boarded the Spirit of '76 after sharing tea and sympathy with Emperor Hirohito in Alaska last month, President Nixon gave U.S. Ambassador to Tokyo Armin Meyer a laconic description of a large problem. When it comes to trouble between the U.S. and Japan, said the President, "The code word is 'textiles.' "

The code word was still the same last week when U.S. Ambassador-at-Large David Kennedy and Kakuei Tanaka, head of Japan's Ministry of International Trade and Industry (MITI), met in Tokyo to initial an agreement severely restricting Japanese textile sales to the U.S. Exports of synthetic garments and cloth will be permitted to rise only 5% and exports of woolens only 1% annually for the next three years. Even that limit may not be reached, because the pact also contains strict item-by-item regulation of 18 specific categories of products; it allows the Japanese almost no freedom to switch shipments from a slowly selling fabric to one which suddenly becomes in great demand.

The "Enemy." Harsh as the terms seemed, the Japanese had little choice. They were "negotiating" under a Nixon ultimatum: agree by Oct. 15 or the White House would impose mandatory quotas under the U.S. Trading with the Enemy Act. U.S. officials further warned that failure to agree to textile quotas could delay the return of Okinawa to Japanese control. With the same strong-arm threat of mandatory quotas, the U.S. forced similar agreements on South Korea, Taiwan and Hong Kong last week. In return, the U.S. lifted the 10% surcharge on textiles from all countries. Except for steel, goods that are restricted by import quotas are exempt from the surcharge, and under rules of the General Agreement on Tariffs and Trade, a duty removed from products of one country must be removed for all countries.

The agreement will wipe out some jobs, and even though the Tokyo government stands ready to provide $700 million to buy up surplus spindles and outdated machinery, Japanese textile manufacturers are not mollified. Last week they organized rallies throughout Japan eclipsing the anti-import rallies staged earlier in the U.S. MITI experts estimate that Japan's textile sales to the U.S. will drop to $530 million a year, from a recent high rate of some $560 million--to say nothing of the $750 million that might have been reached without restrictions. However drastic, that reduction will not save many jobs in the U.S. textile industry; imports from Japan account for only 2% to 3% of the U.S. textile market.

Lesson for Wilbur. The trouble is, textile imports in any amount constitute an extremely emotional issue in mill towns around the country, and Nixon seems determined to deliver on campaign promises to textile executives--mostly from the South--who contributed some $6 million to his 1968 race. He is also irritated with Japanese Prime Minister Eisaku Sato, who, in Nixon's view, has reneged on a 1969 promise to curb textile exports voluntarily. (Sato says he was misunderstood because of an error in translation.) The President also has been eager to teach House Ways and Means Chairman Wilbur Mills not to meddle in foreign policy. It was Mills who persuaded the Japanese to start a voluntary restraints program July 1, but his deal did not please Nixon's Southern textile supporters. Nixon's ultimatum to the Japanese infuriated Mills, who insists that the President was proposing to use the Trading with the Enemy Act in a way never intended by Congress.

In Japan, the threat to invoke the Trading with the Enemy Act has stirred bitter memories of World War II. Race-conscious Japanese are also asking why Nixon has done nothing about West German textile shipments to the U.S., which amount to almost as much as Japanese sales and have been rising more rapidly. Nixon added insult to Japanese injury by choosing to deliver his ultimatum through an obscure bureaucrat: Anthony J. Jurich. In Washington, Jurich is remembered only vaguely as a former foreign policy and defense consultant to the Republican Party and some business firms. In Japan he was totally unknown until Sept. 21, when he turned up unannounced outside Tanaka's office as a spokesman for Nixon and David Kennedy. The embarrassed U.S. embassy could provide little information about him. The State Department had washed its hands of the textile negotiations, which it feels the Administration handled badly.

The Japanese surrender deals a further blow to the fading political fortunes of Sato and his pro-American policies. His party can probably stay in power, but much rancor against the U.S. will remain. About the best that can be said of the settlement is that it frees both U.S. and Japanese officials to concentrate on weightier matters--revaluation of the Japanese yen, for example, and removal of the U.S. 10% import surcharge on all foreign goods. Americans and Japanese can only hope that on those issues both sides will have more of a feel for the other's sensibilities than they have shown in the sorry textile mess.

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