Comments on “US–Japan Trade Frictions: The Past, the Present and Implications for US–China Trade War”

Abstract

Urata (2020) provides a comprehensive overview of US-Japan trade frictions in the 1960-2000 period and examines the economic impacts of the implemented measures. Drawing implications from the US-Japan trade frictions, Urata (2020) attempts to find appropriate policies to stop escalating trade conflicts between the USA and China.Urata's paper provides useful information and many insights. It provides stimulating discussions on how the Japan-US trade frictions emerged in three industriestextiles, steel, and automobilesone after another, and how Japan and the USA dealt with the frictions. The discussions about similarities and differences between the US-Japan trade friction and the USA-China trade conflicts are insightful. Urata (2020) suggests that in order to reduce its trade imbalance vis-à-vis China and deal with China's unfair trade/economic practices, the USA should adopt macroeconomic adjustment polices and coordinate with Japan and the EU. Furthermore, instead of resorting to retaliation, China should use the World Trade Organization's (WTO's) dispute settlement mechanism and opt for mega-free trade agreements such as the Regional Comprehensive Economic Partnership and China-Japan-Korea Free Trade Agreement as well as participating in the Comprehensive and Progressive Trans-Pacific Partnership.One objective of Urata's paper is to examine the economic impacts of the implemented measures such as Voluntary Export Restraints (VER) on the USA and Japanese economies. Urata (2020) claims that the US protectionist policies are counterproductive based on Hufbauer et al. 's (1986) empirical findings that trade protection on automobiles by Japanese export restraints imposed substantial welfare costs on the US economy for saving jobs. More discussion of the welfare implications of changes in US employment and income distribution caused by increasing imports from Japan as well as the implemented measures can be helpful to comprehend overall benefits and costs of trade protectionism. As argued by Batistich and Bond (2019), a rapid rise of Japanese imports might have had a distributional impact by affecting local employment and wages in certain US industries and states. Faced with the VER, Japanese automobile firms started production in the USA, which must have increased local employments in some †Correspondence: Jong-

Trade Wars: Editors' Overview

“…In order to understand more fully the impact of the VERs imposed on Japanese exports to the USA, Jong-Wha Lee (2020) suggests that there is a need to look more deeply at the impact on employment and the income distribution in the US, in particular, differences in the impacts across industries, labor types and geographical areas. Lee raises the question of whether the impact of Chinese competition will be the same as Japanese competition, and then answers his question by suggesting there will be differences because the industries being affected by imports from China are different from those for Japan in 1960-1980.…”