US-China Trade Conflict: Dejavu or New One - Lessons From US-Japan Trade Conflict in 1980s and 1990s - Bruegel
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US-China Trade Conflict:
Dejavu or New One
Lessons From US-Japan Trade
Conflict in 1980s and 1990s
Tamotsu Nakamura
&
Yoichi Matsubayashi
Plan of Talk
1. US-Japan Trade Conflict in Retrospect
2. Similarities Between 1980s/90s and 2018
3. Differences Between 1980s/90s and 2018
4. Lessons From US-Japan Trade Conflict in 1980s
5. Summary
2
External (Trade) Imbalances：1985
US
Surplus Countries
Saudi Arabia
Australia
① Japan
Canada
②
Germany Italy
India
Greece
Denmark
Egypt
Deficit Countries
Indonesia
Venezuela
① US
Qatar
Netherlands
②
Saudi Arabia Kuwait
Mexico
Switzerland
United Arab Emirates
Taiwan Province of China
Germany
Japan
-140 -120 -100 -80 -60 -40 -20 0 20 40 60 31. US-Japan Trade Conflict in Retrospect
US Trade Partners Having Surplus
（1985）
Korea
BEA
Brazil
Italy
Mexico
Hong Kong
Germany
Taiwan
Canada
Japan
0 5 10 15 20 25 30 35 40 45 50 Billion dollar1. US-Japan Trade Conflict in Retrospect (80s & 90s)
5
4
Plaza Agreement Japan‐U.S. Structural
Impediments Initiative(SII) US-Japan
3 Comprehensive
Economic Council
2
1
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
-1
Super 301 of Trade Act
to Semiconductor Industry Acceptance of Strong dollar by
Rubin (US secretary of Treasury)
Voluntary Export Restrictions on
-2 Japanese Cars Exported to USExternal (Trade) Imbalances：2016
US Surplus Countries
UK
Canada
① Germany
Australia
② China
Saudi Arabia
Turkey ③ Advanced countries
Mexico
（Japan・Korea・Netherland
Algeria
etc）
Indonesia
Russia
Italy
Deficit Countries
Singapore
Switzerland ① US
Netherland
②
UK Taiwan
Korea
Japan
China
Germany
6
-600 -500 -400 -300 -200 -100 0 100 200 300 400US Trade Partners Having Surplus（2017）
France
Taiwan BEA
Korea
Canada
India
Italy
Germany
Japan
Mexico
China
0 50 100 150 200 250 300 350 400
Billion dollar1. Similarities (1) Two Countries’ World Share of GDP
About 40%2. Similarities (2) LOW Trade Dependency
Lower Than 40%2. Similarities (3) Peak-out in Trade Surplus (Japan)
Trade balance in Japan(percentage of GDP)
%
UN2. Similarities (3) Peak-out in Trade Surplus (China)
Trade balance in China (percentage of
GDP)
%
8
6
4
2
0
-2
-4
-6
1980 1985 1990 1995 2000 2005 2010 2015 UNComparisons: Behavior of Trade Surplus (USA)
0
-1
-2
-3
-4
-5
-6
1980 1985 1990 1995 2000 2005 2010 2015
UNComparisons: Behavior of Trade Surplus (Germany)
10
8
6
4
2
0
-2
-4
-6
1980 1985 1990 1995 2000 2005 2010 2015 UNComparisons: Behavior of Trade Surplus (France)
4
3
2
1
0
-1
-2
-3
1980 1985 1990 1995 2000 2005 2010 2015
UN2. Similarities (4) Rapid Aging (Japan)
Driving Force of Decline in Trade Surplus2. Similarities (4) Rapid Aging (China)
Driving Force of Decline in Trade SurplusComparisons: Pace of Aging (USA)
Comparisons: Pace of Aging (Germany)
Comparisons: Pace of Aging (France)
2. Similarities Should be Emphasized 1. Two Countries’ Share in World GDP 40% 2. Three Countries Less Dependent on Trade 3. Peak in Trade Surplus During Conflict Periods For Japan and China 4. Start of Rapid Aging for Japan and China
3. Differences (1) Real or Nominal Threat?
Allies (Partners) or Antagonists (Opponents) ?
“Japan is a Partner to USA”
Most Japanese Believe,
But Converse is ・・・・・？？？
Why US Republicans Soft to Japan in
Trade?
Because of China??
China is Superpower
Both in Economy & Military.3. Differences (1) Real or Nominal Threat?
China Will Overtake US in GDP Sooner!!3. Differences (1) Real or Nominal Threat?
Under Same Rules or Different Rules
Is Competition “Fair”?
In Particular, “Innovations” or
“Intellectual Property Rights”
US and Japan Compete Under “Same” Rules
How About China and US?3. Differences (1) Real or Nominal Threat?
China Already Overtook US? Innovations
▪ 松林さん Number of Patents
1400000
1200000
1000000
800000
600000
400000
200000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
WIPO
China US Japan3. Differences (1) Real or Nominal Threat?
Under Same Rules or Different Rules
Which is More Important?
Trade Deficits
* US President Looking at this Deal?
or
Innovation Race
* Vital Role in Long-Run
and Military Strength3. Differences (2)
Policy Instruments in US-Japan Conflict
5
4
Plaza Accord Japan‐U.S. Structural
Impediments Initiative(SII) US-Japan
3 Comprehensive
Economic Council
2
1
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
-1 Super 301 of Trade Act
to Semiconductor Industry Acceptance of Strong dollar by
Rubin (US secretary of Treasury)
-2
Voluntary Export Restrictions on
Japanese Cars Exported to US3. Differences (2)
Policy Instruments (Coordinations or Battles)
In 1980s and 1990s
Plaza Accord
Exchange Rate Adjustments
Macro Policy Coordination
Structural Impediments Initiative
In 2010s
Tariffs, Sanctions, Safeguards
&
Series of Retaliations??3. Differences (3)
Long and Complicated Supply Chains
In 1980s and 1990s
Not Many Industrialized Economies
⇒ Short and Simple Supply Chains
→ Consequences are “Predictable”
In 2010s
Long and Complicated Supply Chains
⇒ Consequences are Unpredictable
→ Cut Your Own Body with Your Own Sword!!3. Differences Should be Emphasized
1. Japan Was NOT Real Threat to US
China Can Be!!
2. Coordination V.S. Fights or Battles
3. Supply Chains
Short and Simple ⇒ Predictable
Long and Complicated
⇒ Consequences are
Unpredictable4. Lessons (1) Macro or Micro?
Trade Deficits CANNOT Be Solved
By Trade Policies (Battles)
1. Domestic Problem
Watch Out !! Even US Aging Rapidly
Trade Deficits in US Increasing Further
US on Journey in Searching New Trade Enemies
Germany, Japan ⇒ China ⇒ Which is Next?
2.Macroeconomic Coordinations &
Structural Reforms May Help But Cannot Solove!!US’s Never-Ending Journey in Searching “Enemies”
0
-1
-2
-3
-4
-5
-6
1980 1985 1990 1995 2000 2005 2010 2015
UNJapan Has to Start Searching and Finding
“Enemies” ???
Japan Has and Continue to Have Trade “Deficits”
%
UN4. Lessons (2) Uncetainties and Irreversibilities
Uncertainties DO Matter
Only When Irreversibilities Exist
In 1980s and 1990s,
Uncertainties in Trade & Exchange Rates
⇒ Overseas Shift of Production in Japan
(Hollowing-Out)
Because of Irreversiblity
Slow Recovery from Recession (Lost
Decades)4. Lessons (2) Uncetainties and Irreversibilities
In Case of US-Japan Trade Conflict,
Japanese Moved to Asia For Production
In Case of US-China Conflict,
Many Advanced Economies Invest in China
Not Only for Production But for Market
Purpose
Uncertainties → FDI to China for Production ↓
(China Economic Growth ↓)
However, China is Still Attractive as Market!!4. Lessons (3) “Size” Does Matter In 1980s and 1990s, East Asia was Enough to Accommodate Japan In 2020s and Later Asia will NOT be Enough to Accommodate China and India!! Watch Out !! Not Only “One Belt, One Road Initiative” But Also “China’s Penetration to Africa” (Close to Europa)
4. Lessons (3) “Size” Does Matter
Do You Remember What Happened
On 5th of October in 1971?
Unfortunately, I Forgot it!
PRC Became a Member Not Only of United
Nations
But Also of Security Council!
Who Supported PRC(People Republic of
China)? African Nations !!
“Irreversible” Relationship Between Africa & China4. Lessons (3) “Size” Does Matter
China’s Penetration to Africa
billion dollar Africa’s Imports From
90
80
70
60
50
40
30
20
10
0 UN
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
China Germany France US4. Lessons (3) “Size” Does Matter
China’s Penetration to Africa
Africa's Import from China/Africa's Import from EU15
0.6
0.5
0.4
0.3
0.2
0.1
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20154. Lessons Should be Emphasized
1. Trade Deficits is Domestic Problem
CANNOT Be Solved By Trade Policies
(Battles)
2. Uncetainties together with
Irreversibilities
Compound the Problems
3. Watch Out What Happening Behind the
Conflict!!5. Summary
On September 26th, US and Japan Agreed to Enter
For Negotiating TAG (=Trade Agreement on Goods)
(Joint Statement of the United States and Japan)
US Japan
1. Bilateral Win-Win?
To Avoid
Negotiation (TAG=
1. US-JAPAN FTA
2. Tariff Trump Abe
2. Tariff Hike on
Reduction Good?)
Cars5. Summary
Japanese Side Emphasizes
For Market Access, Japan’s Previous Economic
Partnership Agreements Constitute Maximum Level
EU-Japan Economic Partnership Agreement
(EPA)
is an Important Negotiation Asset
Hopefully, Use It a Bargaining Chip
in Negotiation with ・・・・!!5. Summary
1980・90s 2010s
Main Surplus Japan China
Country (Japan) (Germany)
Main Deficit US US
Country
Trade Friction About 15 years ？
Period (Forever ?)
U.S Reagan（Rep） Trump（Rep）
Administrations Bush（Rep）
Clinton（Dem） 425. Summary
1980・90s 2010s
Policy Exchange Rate
Macroeconomic Adjustment（?） ？
Policies Macroeconomic Policy
Coordination（?）
Trade policy Individual Negotiation
→ Comprehensive
Negotiation
Surplus
Country
Japan's Economic China's Economic
Backgrounds Growth Slowdown Growth Slowdown?
of End of
Trade Friction Deficit US Economic Growth US Economic Growth
Country
Recovery Slowdown?
43Thank You Very Much for Your Attention !!
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