Hard Bargaining with Japan

As Japan's irrepressible economy makes its power felt around the world, the U.S. is both cooperating and colliding with it. U.S. industrialists who suffer the sting of foreign competition--in textiles, steel, electronics--view Japan as the chief villain. On the other hand, many businessmen look yearningly toward Japan as an enormous market for American goods. Last week two significant developments took place that will strain relations in one area of business and possibly smooth them in another.

Textiles. Commerce Secretary Maurice Stans reported on his mission to goad Asian trading partners, chiefly Japan, into restraining their textile exports. The outcome: no deal. Japan sends nearly $400 million worth of textiles yearly to the U.S., and this has sorely hurt whole towns in the South. They live off their textile mills, which employ many unskilled Negroes.

If Japan does not voluntarily hold down its shipments soon, the U.S. will move toward mandatory import controls. Protectionist sentiment is rising in Congress. Earlier this month, Wilbur Mills introduced a bill calling for textile import quotas, and it will get massive support. If the bill passes, it could set off a round of moves and countermoves restricting free trade.

Autos. Detroit is alarmed by Japanese auto exports to the U.S., which reached 110,000 cars last year. Instead of crying for quotas, U.S. auto men want to start producing in Japan, the only major non-Communist country that prohibits car manufacturing by foreigners. Under intense pressure by its trading partners, Japan has agreed to allow outsiders to buy up to a 50% interest in any of its auto firms--but not until 1972. By that time, the government hopes to have prodded Japan's twelve automakers into consolidating into two or three groups that would help them to cope with U.S. penetration.

Last week Chrysler Corp. got a toehold by making a "general agreement" with Mitsubishi, Japan's second largest industrial corporation, to set up a joint company in which Chrysler would have a 35% share. The government in Tokyo will have to approve the deal, and is not likely to be quick about it. The two firms hope to collaborate on some research, then move on to marketing each other's cars in Japan and the U.S. Later, they might join in assembling Chrysler cars in Japan. Ford also started negotiating in earnest last week with Japan's Toyo Kogyo for joint production of automatic transmissions.

In both textiles and autos, some hard bargaining lies ahead between the capitals of the two largest economic powers of the non-Communist world. Obviously, the cause of free trade will be helped if each becomes more tolerant of the other's exports.

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