JAPAN: POTENTIAL RESPONSES TO DISCRIMINATORY TRADE ACTIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01058R000101310002-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: November 13, 2009
• Sequence Number: 2
• Publication Date: April 17, 1985
• Content Type: REPORT

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I I
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
17 Apr i 1 1985
Japan: Potential Responses
Discriminatory Trade Actions
Japan's dependence on the United States for
defense would temper a deterioration in bilateral
ties, as would the complex weave of political and
social as well as economic relations that are part
of the postwar period. The Japanese see the US as
relationship.
Summary
An import surcharge on Japanese goods, a
complete ban on imports of Japanese tele-
communications equipment, or similarly harsh US
retaliation for a perceived failure of the current
MOSS (market-oriented sector-specific) trade
negotiations would, we believe, mark the beginning
of a downward trend in bilateral relations. The
Japanese have traditionally placed themselves among
Washington's staunchest allies and a widespread
perception that Tokyo is viewed as an enemy in the
commercial field could sour other aspects of the
This memorandum was prepared by Japan Branch,
Northeast Asia Division, Office of East Asian Analysis.
Information available as of 17 April was used in its
preparation. Questions and comments are welcome and may be
dire he Chief, Japan Branch, Northeast Asia Division,
OEA,
EA M 85-10077CL
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the primary partner and would be unlikely to move
quickly to alter the fundamentals of the alliance.
But discriminatory sanctions against Japan would
contribute to a loss of confidence in the United
States as an ally. The US-Japanese relationship was
hurt by the "Nixon shocks" of 1971, when without
warning the US banned soybean exports to Japan,
established relations with China, and imposed a
global import surcharge. Those incidents are still
cited as examples of US unreliability and probably
were a factor in hastening Japan's move to a more
independent foreign policy in the 1970s.
The Japanese have moved more quickly than we thought
they could or would to effect progress in MOSS sectors
(telecommunications, electronics, forestry products, and
pharmaceuticals and medical equipment) despite their belief that
the trade imbalance is due largely to the unusual strength of the
dollar. Harsh moves by Washington might extract more
concessions, but improved market access will do little to redress
the bilateral trade imbalance in the near term.
-- Concessions gained probably would not lead to significant
increases in US exports until the dollar weakens.
-- Improved access for foreign products will not affect
Japanese buying preferences in the short term, and a
perception that the United States was unfairly
discriminating against Japan might provoke a reaction
against US products.
Furthermore, while conceding on some MOSS points, Tokyo
might retaliate in other sectors to show it has not capitulated
completely to Washington.
-- The Japanese certainly would go to GATT in the event of
Japan-specific action. They might receive support from
countries that would see themselves as the next target.
For example, EC countries--still negotiating steel export
restraints with Washington--might vote with the Japanese.
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Longer Term Responses
Given the importance of the US market to Japan, we believe
Tokyo would do what it could to mollify Washington in an effort
to end retaliatory measures--perhaps imposing voluntary export
restraints, an export surcharge, or an interest equalization tax
to reduce bilateral trade imbalances--but would begin to plan for
a future marked by less interdependence with the United States.
-- Tokyo would ensure that the United States remains only a
swing supplier of US coal and LNG.
-- The Japanese would attempt to diversify other commodity
purchases away from the United States. The Japanese
already are buying more Chinese corn at the expense of US
-- Japanese companies would try to reduce their dependence on
the US export market--probably with Tokyo's help--by
increasing direct investment in the United States and
developing new markets.
Harsh US action would be damaging to Prime Minister
Nakasone, who is already under fire for his handling of the MOSS
negotiations. The Liberal Democratic Party (LDP), as the ruling
party, might also be affected. Nakasone has staked much prestige
on his personal relationship with the President, and popular
support for the LDP is based in part on the party's ability to
maintain a stable economy and manage relations with the United
States.
-- With his position already potentially weakened by the
illness of his major ally--political kingmaker Kakuei
Tanaka--Nakasone must be wary of attack from his rivals.
In the face of discriminatory US measures he would be less
willing to push for concessions to Washington. Concern
over his political position has already contributed to more
caution on his part, as demonstrated by the lack of
specifics in the 9 April trade package. Nakasone's
successor probably would also be less sympathetic to the
United States on issues where there was no palpable gain to
Japan.
-- Estimates by Japan's Economic Planning Agency indicate an
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import surcharge would have a significant impact on GNP
growth. Any resulting rise in unemployment would damage
the credibility of the LDP.
Basic questions about the bilateral relationship could
affect cooperation across the board by accelerating Japan's
movement toward a more independent stance that avoids the
appearance of following Washington's lead.
-- Tokyo might pull back on joint aid programs and concentrate
on unilateral efforts that would open the way for increased
economic penetration in third country markets. In
addition, the Japanese might be less willing to accommodate
US policy in doling out aid to countries where they have
few interests.
Defense cooperation could be slowed, and Tokyo would be
even more resistant to sharing defense related
technologies, especially in light of Defense Department
efforts to restrict Japan's access to US technology.
Joint programs,, such as the space station, could be
jeopardized.
At the same time, Tokyo would move to strengthen relations
with the rest of the world--particularly Europe, Southeast Asia
and China.
-- Japan would probably use economic incentives to strengthen
ties--perhaps to the detriment of US market share.
-- Tokyo might also step up efforts to ease tensions with
Moscow, especially if Gorbachev continues to appear more
open and interested in improving relations.
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Japan: Potential Responses to Discriminatory Trade Actions
Distribution -
Copy 1 - Donald Gregg, Office of the Vice President -
Copy 2 - The Honorable W. Allen Wallis, Department of State
Copy 3 - The Honorable Paul Wolfowitz, Department of State
Copy 4 - Desaix Anderson, Department of State
Copy 5 - Gaston Sigur, National Security Council
Copy 6 - Roger Robinson, National Security Council
Copy 7 - The Honorable Richard Armitage, Department of Defense
Copy 8 - James Murphy, Office of the United States Trade Rep. -~---~-~~^~~~ w'}~,~t~T
Copy 9 - Ambassador Michael Smith, Office of the United States Trade Rej~.Pd~~'
Copy 10 - The Honorable Lionel Olmer, Department of Commerce
Copy 11 - The Honorable Daniel G. Amstutz, Department of Agriculture
Copies 12-15 - Office of Le islative Liaison
Copy 16 25X1
Copy 17 - The Honorab a David G. Mu ford, Department of the Treasury
Copy 18 - William Brooks De artment of State
Copy 19 - 25X1
Copy 20 - DCI
Copy 21 - DDCI
Copy 22 - Executive Director
Copy 23 - DDI
Copy 24 - NIO/Economics
Copy 25 - NIO/East Asia
Copy 26 -Vice Chairman, National Intelligence Council
Copy 27 - Senior Review Panel, Office of the DCI
Copy 28 - C/PES/O MPS/DDI
Copy 29 - D/OEA
Copy 30 - D/CPAs
Copy 31 - Special Assistant for Dissemintion Analysis, CPAs
Copies 32 & 33 - C/CPAs/I MC
Copies 34 & 35 - C/OCR/DSG
Copy 36 - OEA Production Staff
Copy 37 - C/OEA/Northeast Asia Division
Copy 38 - C/OEA Ja an Branch
Copy 39 - C/EA 25X1
Copy 40 - Author
DDI/OEA/NA/Japan/DVD:merj (17 April 1985) 25X1
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