Business: SHOWDOWN IN TRADE WITH JAPAN

RELATIONS between the two greatest industrial powers in the non-Communist world, the U.S. and Japan, are becoming increasingly strained. Japan's campaign to regain Okinawa is only a part of the problem. An acrimonious dispute over trade is moving to the point of showdown. The issue will be debated at a joint meeting of the U.S. and Japanese cabinet members in Tokyo this month, and again when Prime Minister Eisaku Sato meets President Nixon in Washington in November. The expanding argument centers on the protectionist policies of both countries, but the U.S. has brought the trouble to a head by pressing for quotas on textile imports.

New Barriers. However it is worked out, the textile controversy will affect the fabric of life in both nations, determining in part whether low-paid textile workers in the U.S. will be thrown out of jobs, whether inflation-weary U.S. consumers will have to pay more for their clothes, and whether the comfortably cooperative structure of Japanese industry will be changed and liberalized. More than that, the fight is likely to affect the future of the international movement toward freer trade.

That movement hit its high-water mark two years ago, when the Kennedy Round of world trade negotiations produced the deepest industrial tariff cuts ever made. Since then, protectionism has been staging a global comeback and has involved the U.S. in disputes with many nations. In Europe, a host of new nontariff barriers have partly offset the cuts in duties. Special taxes on imports last year helped West Germany to record a surplus in trade with the U.S. for the first time.

The U.S. has become increasingly alarmed by the shrinkage of its trade surplus from $7 billion in 1964 to less than $1 billion last year. Washington has reacted by putting up barriers against products as diverse as Mexican tomatoes and European and Japanese steel. Since January, Congressmen have filed 300 bills to restrict imports of lamb, baseball gloves, artificial sweeteners and other products.

While these moves have bruised feelings on all sides, no dispute is quite as emotional or contentious as that between the U.S. and Japan. The Japanese used to buy far more from America than they sold, but last year they sold $1.1 billion more to the U.S. than they bought (see chart, page 72). That was possibly the biggest trade deficit that the U.S. has ever registered with any nation. Altogether, Japan's exports in 1968 rose by 25%, and its shipments to the U.S. accounted for more than two-fifths of the gain. The reason, many aggrieved U.S. businessmen contend, is that Japan has been flooding American markets with goods made at far lower wage rates than any U.S. company could get away with paying. Some $400 million worth of textiles were notable among those exports. Southern Congressmen have set up a rising clamor for quotas to restrain the influx, and the textile issue has become a symbolic one.

Double Injustice. Though the Japanese complain about the injustice of textile quotas, they maintain a closed-door policy at home, shutting out considerable amounts of U.S. goods and capital. Two years ago, a committee of the Organization for Economic Cooperation and Development reported that "no other advanced country confronts the foreign investor with the sort of obstacles presented by Japan."