Conclusions

A goal of this paper was to provide a framework that allows us to make sense of the USJapan and US-PRC trade relationships over the past thirty years, seeing similarities and differences as well as implications for evolution of the rules-based GATT/WTO system. The central similarity in the two bilateral relationships is the huge bilateral trade imbalance, a reflection of the export-led growth strategies of theses countries, but also of underlying macroeconomic conditions. In both cases, the result has been a strain on the reciprocitybased trading system. We have looked at the imbalance as the result of exports that grew too quickly and imports that grew too slowly, but in both cases, the US public and government officials chose to interpret the imbalance as a symptom of non-market considerations. In both cases, the official responses included both policies that addressed the symptoms as well as efforts to remedy features of the partner economy that were perceived as underlying causes. In both cases, however, the US public and government officials were slow to acknowledge the underlying cause at home: the very low US saving rate and a resulting domestic macroeconomic imbalance that translated into a large external imbalance.³¹

On the import side, the two cases are similar in that the US resorted to VERs and AD, as well as negotiation of preferential agreements with traditional suppliers of relevant imported products in both cases. One difference is that the US has recently begun using countervailing duties against the PRC, an approach it did not take with Japan. Another difference is the use of the PRC-specific safeguards negotiated when the PRC joined the WTO.

On the export side, use of US Section 301 and GATT dispute settlement against Japan in the 1977–1994 period looks similar to the use of WTO dispute settlement against the PRC since 2006. Differences are more subtle; not surprisingly, US efforts in both cases reflected dominant export interests at the time. In the case of Japan, the role of keiretsu and active industrial policy were seen as an important part of the problem. In the case of the PRC, the legacy of a non-market system remains an issue, even though an increasing share of importcompeting products and exports come from parts of the economy where private ownership and market forces are strong.

US frustration with its lack of success in prying open the Japanese market led to new rules introduced into the WTO system (i.e., Agreement on the Application of Sanitary and Physosanitary Measures, Technical Barriers to Trade Agreement, Government Procurement, Information Technology, TRIPS, and Agriculture) in the Uruguay Round negotiations. The most important change, however, was the introduction of a new system of dispute resolution with “teeth,” though this required the US to modify the aggressive unilateralism that had characterized its approach to trade policy in the pre-WTO period. As we have noted, no progress has been made on AD, although the improved disputesettlement system may help to address this problem over time.

Looking ahead to new issues, prospects for global negotiations are now dominated by two issues that overshadow the ones that constituted the Doha Round agenda as well as others that have vied for public attention most recently (e.g., contaminated foods and unsafe toys). One major new issue is the global recession, with the associated decline in the volume of world trade and the rise of new protectionism. The second is climate change and the tradepolicy implications of efforts to limit carbon emissions—and to deal with “carbon leakage” from countries not willing to join in these efforts. the PRC in particular has already been the major target of a surge of WTO-legal administered protection and is likely also to be a major target of efforts to penalize imports from countries that do not sign on to new multilateral arrangements on carbon emissions.³²

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