Even as the U.S. continues to seek trade concessions from Japan, economists are underscoring the difficulties in reducing the imbalance in their trade flows. A recent analysis by Joseph P. Quinlan of Dean Witter Reynolds Inc. casts intriguing light on the problem.
Quinlan's focus is containers, the 40-foot-long metal boxes that are transported by ship from port to port and then carried by railcar or truck to their final destinations. Ironically, notes Quinlan, when measured in terms of containers, "the U.S. can boast of a consistently strong trade surplus with Japan." Last year, it sent nearly 619,000 containers to Japanese ports, 44% more than it received (chart).
In trade data, however, the devil is often in the details. U.S. containers bound for Japan, Quinlan notes, are mainly stuffed with high-volume low-value primary products, such as lumber, waste paper, scrap metal, grass seed, and resins. In fact, the lead item on the list last year had nothing to do with America's new global competitiveness: It was some 65,000 containers of hay--the stuff cows like to munch on.
By contrast, Japan's top container exports to the U.S. consist of auto parts, tires, and other components required by Japanese transplants. And the next largest category is electrical goods, including office machines, stereo equipment, and computer parts. Thus, while America's biggest exports to Japan are commodity-type low-value-added products, Japan's exports to the U.S. are predominantly high-value-added products.
To be sure, Japanese purchases of such billion-dollar, high-tech U.S. exports as aircraft, electronic components, and computers are up 25% to 30% this year, despite Japan's recessionary climate. But, as economist Rosanne M. Cahn of CS First Boston notes, America is also buying more of these products from Japan, widening the trade deficit in these items by nearly 20%.
"If imports start out much larger than exports," says Cahn, "it takes enormous growth in exports to adjust trade--particularly if major U.S. imports from Japan are still growing rapidly."