Does the United States face a trade crisis with Japan? Are the Japanese competing unfairly by not allowing American goods into their markets while "dumping" their goods into the United States? Does the trade imbalance that the United States has with Japan indicate that the US economy is destined for weakness? These questions have received much attention by the American media recently, and there have been charges that America is selling its heritage and economic strength to the Japanese. Some Americans, mired in recession, have turned to "Japan-bashing" and place the responsibility for the trade situation with Japan solely on the Japanese. In their book Reconcilable Differences, Fred Bergsten and Marcus Noland take on the complicated issue of trade between America and Japan, and move beyond the headlines and the emotions to examine the issue in detail. This research considers their work in light of recent events and considers whether the perceived crisis is, in fact, a crisis, and what steps can be taken to return the relationship to a more equitable footing.
While the media and many politicians focus on the bilateral relationship between Japan and the United States, such a focus is short-sighted and ignores the wider implications of the economic policy of each country. Japan and the United States are both global economic powers, importing and exporting to a number of countries besides each other. When viewed from a global perspective, the two nations' global trade balances have followed nearly opposite patterns since 1980: Japan saw an increase through the 1980s in its account balance, which then declined in the early 1990s and has recently begun to ascend again. During the same period, the American account balance fell steadily through 1987, then increased through 1991, when it fell off again (in 1992).
If both nations were to somehow achieve zero global account balances, Japan would still be likely to run an account...