Trade and Politics: Mission Impossible

By MICHAEL DUFFY

It isn't easy to single out the low point of the trade mission to Japan that George Bush completed last week. Was it that his pleas for stepped-up Japanese purchases of American auto parts belittled the presidency and made him seem the tool of overpaid corporate CEOs? Or that the largely unenforceable agreements he reached were soon denounced as inadequate by the U.S. automobile executives who accompanied him on the journey? Or did the nadir come when the President threw up on the trousers of Japanese Prime Minister Kiichi Miyazawa and then passed out at a state dinner in Tokyo?

The spectacle of Miyazawa cradling the prostrate leader of the free world in his lap was doubly unsettling and sent shudders around the globe. White House spokesmen assured the public that Bush was suffering from nothing more serious than exhaustion and a stomach-churning touch of gastroenteritis. Still, the brief fainting spell brought to the fore concerns about the President's health and reminded voters that Dan Quayle remains only a heartbeat away from the Oval Office. Far worse for Bush, the image was an obvious metaphor for the American economy: flat on its back, seeking succor from a resurgent Japan.

That was not the pose Bush meant to strike when he embarked on the star- crossed 12-day journey to Australia, Singapore, South Korea and Japan. Planned last November as a routine diplomatic swing, the trip was hastily converted by White House officials into a full-blown trade mission after growing public dissatisfaction with Bush's handling of the recession triggered a steep drop in his approval ratings. In an effort to counter criticism that he cares more about foreign policy than the woes of unemployed Americans, Bush proclaimed the trip was about generating "jobs, jobs, jobs." As he explained in an interview just before his departure, "I'll do what I have to do to be re-elected."

He should have stayed home. The President's call for free trade boomeranged in Australia, where farmers were quick to point out that export subsidies for American grain prevent wheat grown Down Under from being sold competitively in the world marketplace.

Once he got to Japan, Bush's odyssey degenerated into the trip from hell, as the President was forced to endure politely phrased, but nonetheless pointed, reminders from his hosts about America's shortcomings. During a joint press conference with Miyazawa, Bush sat silently as the Japanese leader ticked off a list of domestic woes that have damaged American competitiveness: from homelessness and the AIDs epidemic to a decline in education. Though Miyazawa added, "Since Americans themselves are aware of these problems, I am convinced they will overcome these problems," Bush looked a bit like an overextended borrower sitting through a condescending lecture from an impatient loan officer.

Miyazawa, fearful of adding to growing anti-Japanese sentiment in the U.S., did not want to send Bush home empty-handed. But the bargain struck in Tokyo will do little to cure the recession, create new jobs, or narrow the $41 billion U.S. trade deficit with Japan over the long term. Under pressure to open their markets, the Japanese agreed in the final hours of Bush's tour to find ways to buy more American cars, auto parts, computers, glass and paper. Some of these concessions were in the works long before Bush arrived; others sounded good, but were less than met the eye.

For example, Bush claimed that Japanese automakers' pledge to double their ( purchases of U.S-made auto parts to $19 billion will create 200,000 U.S. jobs. But $15 billion worth of the components will be used in Japanese auto plants in the U.S., not exported to Japan. Even the $4 billion in parts that are shipped to Japan may eventually find their way back to America in Japanese- assembled Toyotas, Hondas and Nissans headed for the U.S market. Japanese manufacturers also agreed to assist American makers in marketing American cars in Japan.

Bush paid a high political price in exchange for this thin gruel. By pressing Tokyo to commit itself to purchase specific quantities of U.S. products, Bush abandoned his long-held free-trade principles for less competitive "managed trade," in which governments agree to pressure private industries to meet preset goals. Trying typically to have it both ways, the President repeatedly warned that any departure from free trade would damage the U.S. economy, which has become increasingly dependent on sales of American exports. Arriving in Washington on Friday, he denied that the Tokyo accords were tantamount to protectionism. "I don't think we're forcing anybody to buy something," Bush said. "I don't view that as managed trade."

Whatever the agreements are called, they are not likely to boost U.S. auto sales in Japan significantly -- or to make a deep cut in the unemployment rate, which rose to 7.1% in December, the highest in 5 1/2 years. Even if U.S. cars were widely available in Japan -- and they aren't -- it is unlikely that many would become hot sellers. Detroit has not cared much about the Japanese market for the past 50 years, even though it is now the second largest in the world (52 million vehicles on the road, in contrast to 183 million in the U.S.). Says Edward Mertz, a GM vice president: "It really wasn't a priority."

So far, no U.S. automaker has tried to build a car tailored for the Japanese market. That would require a steering wheel on the right, a shorter wheelbase to navigate the narrow streets of Japanese cities and greater fuel efficiency to offset higher Japanese gasoline prices. Chrysler chairman Lee Iacocca declared last week that his company would redesign some of its models for the Japanese market and be ready to sell them later this year. Then there is the question of quality -- something the Japanese are usually too polite to mention in public. During last week's talks, Nissan president Yutaka Kume brushed aside the suggestion that he and his colleagues had agreed to buy American auto parts out of "charity." That, said Kume, "would be too arrogant." But privately a Nissan official conceded that the buying plan was "an act of goodwill."

American buyers aren't so merciful. At the Greater Los Angeles Auto Show last week, Rene Pacheco, a contractor who owns three Toyota pickups because he believes their American counterparts aren't as reliable, dismissed Detroit's latest offerings. "Take this car here," he said, pointing to a moderately expensive U.S. model. "Look at the paint job. Americans are into details. If you're going to spend $25,000, I don't want something that looks like this. The Japanese have a better product." Similar reasoning led the Los Angeles transportation commission to authorize the purchase of 41 light railcars for the city's Metro Rail Green Line from Sumitomo, a Japanese builder, though a bid from an Idaho-based manufacturer was $5 million lower.

Public opinion surveys have consistently shown that voters blame American business practices more than Japanese unfairness for the trade imbalance. The Administration often takes the same view. During a visit to Japan in November, U.S. trade negotiator Carla Hills conceded that America's continued reliance on deficit spending hampers the nation's ability to save, invest and increase productivity. "We know the federal deficit is the problem," she said. "Too many people believe that the trade deficit is the result of closed markets. But closed markets are just the backdrop. Opening markets removes that backdrop and makes the problem less emotional."

But Bush glossed over such realities the minute he decided to take 21 American corporate chiefs, including leading Japan bashers like Iacocca, on the trip (only 18 made it all the way to Japan). By doing so, Bush was making a not-too-subtle threat to the Japanese that they could either play ball with him or take their chances with a more protectionist Democratic Congress. The threat was spelled out last week by outgoing Commerce Secretary (and soon-to- be Bush campaign chairman) Robert Mosbacher: "In the gulf war, the Japanese ended up paying without getting any credit. If they don't do something now, they will again end up paying without getting credit."

Most of Bush's rivals for the White House are staking out nuanced positions on trade. While populist Democrat Tom Harkin and conservative Republican Pat Buchanan both talk tough about forcing the Japanese to open their markets, Democrats Bill Clinton, Bob Kerrey and Paul Tsongas have argued that successful competitiveness begins at home. Clinton recently told a working- class audience in Manchester, N.H., that Bush cannot solve the nation's economic problems by seeking concessions from Tokyo. The Japanese, Clinton said, will help get Bush "past the election, but over the long run, we're going to have to compete."

Even good old-fashioned American competitiveness may not be enough to crack the market in a society where stylized rituals still predominate in business as well as pleasure. Last week in Kyoto, Bush watched eight men in brightly colored robes demonstrate an ancient Japanese game called kemari, in which players use their feet to keep a large deerskin ball inside their small circle without ever letting it touch the ground. The object of the 1,300-year-old game is not so much to win as to display proper form and correct etiquette. The President watched the less-than-riveting spectacle for a while, then impulsively threw himself into the contest. Without regard for the players' harmony, or wa, Bush entered the circle (strike 1), hit the ball with his head, soccer-style (strike 2), and kicked it out of the circle completely (strike 3). At game's end, while the Japanese players politely tried to mask their dismay, he shouted, "We won! We won!"

CHART: NOT AVAILABLE

CREDIT: TIME /CNN POLL

From a telephone poll of 500 American adults taken on Jan.2 by Yankelovich Clancy Shulman. Sampling error is plus or minus 4.5%. "Not sures" omitted.

CAPTION: TRADE WITH JAPAN

With reporting by Barry Hillenbrand and Kumiko Makihara/Tokyo and Walter Shapiro with Bush