One month after taking office, President Clinton set forth a simple but powerful mission statement to guide trade policy: "We must compete, not retreat." At the same time, he made clear that his trade policy would not be business as usual. "We will continue to welcome foreign products and services into our markets but insist that our products and services be able to enter theirs on equal terms." Since that time, President Clinton has been unwavering in his commitment to secure tough but fair trade agreements -- and to make sure that those agreements are enforced.
President Clinton has made the economic relationship with Japan a model for his distinctive approach to trade policy. Accordingly, one of his first trade initiatives was to establish a "framework for a new trade relationship with Japan." In the 33 months since the Framework Agreement was signed, the Administration has concluded more trade agreements with Japan than any previous administration. And in keeping with the President's commitment to America's companies, workers and farmers, the Administration has followed through on implementing, reviewing, and enforcing these agreements. The President's consistent application of the principles he laid out in his first months in office is now producing convincing results.
The Administration's strategy is results-oriented. The agreements include objective criteria for measuring progress and timelines for review of the agreements. The Administration has placed a high priority on enforcing the agreements, which is helping to ensure they deliver real benefits for American companies, workers, and farmers.
The Administration's strategy is showing positive results. In the goods sectors covered by our Uruguay Round, Framework, and other bilateral agreements, U.S. exports to Japan have grown over 85 percent since this Administration took office. Growth in exports to Japan in these sectors is 3 times greater than growth in other U.S. exports to Japan -- which has also been strong. Indeed, growth in all U.S. exports to Japan of 34 percent has been over twice as great as growth in U.S. exports to the European Union. Total U.S. exports to Japan reached a record $64 billion in 1995.
The July 1993 Framework Agreement is the cornerstone of the Administration's trade policy with Japan. The Framework focuses on all three aspects of the economic relationship with Japan-- macroeconomic, structural and sectoral--and it establishes guidelines for review of the agreements to ensure that the desired results are achieved. This strategy is now paying off: in the goods sectors covered by the Framework Agreement alone, U.S. exports to Japan have risen 120 percent since the Agreement was signed -- four times as fast as other U.S. exports to Japan. U.S. businesses and workers are achieving successes in sectors covered by Clinton Administration trade agreements.
Autos and Auto Parts: Since the auto and auto parts agreement was signed in August 1995, U.S. auto and auto parts exports to Japan have risen over 35 percent, totalling $3.8 billion in 1995 -- already exceeding exports to the European Union. In 1995, the Big Three and Japanese transplant producers exported over 140,000 U.S.-made vehicles to Japan, up nearly 40 percent from 1994.
Recognizing that U.S. auto makers could expand their sales if given adequate opportunity to display their products in Japan, the Administration targeted access to dealerships as an important part of the August 1995 auto and auto parts agreement. Since the agreement was signed, the Big Three U.S. automakers have added 30 high-quality, high-volume dealer outlets in Japan, but more progress is required.
Deregulatory actions in Japan are beginning to lead to more sales for competitive U.S. suppliers in the auto parts aftermarket. U.S. parts suppliers will now have the opportunity to sell their products through Japan's major auto parts retailers and service stations. Such access will dramatically increase U.S. auto parts sales to Japan: For example, as result of opportunities created by the agreement, Tenneco Automotive, which has made efforts to break into this market for years, expects to expand its sales of shocks and struts in Japan from the existing level of 70,000 units per year to 105,000 in 1996.
Telecommunications Equipment: Since two agreements on telecommunications procurement were signed on November 1, 1994, U.S. exports of telecommunications equipment to Japan have increased nearly 50 percent, to $1.7 billion in 1995. This is almost twice as fast as the growth of U.S. exports of telecommunications equipment to the European Union, albeit starting from a lower base.
Cellular Telephones: After years of stalled negotiations, the Clinton Administration concluded an agreement in March 1994 with Japan to open the cellular telephone market in the Tokyo-Nagoya area, the largest population center in Japan. Since the agreement was signed and the Japanese Government instituted deregulation measures, subscribers to the North American designed system have grown from 22,000 to 600,000. Motorola, which tried unsuccessfully for years to break into this market, provides the bulk of the equipment to build and maintain this system, with sales values in the hundreds of millions of dollars per year. Greater competition in the region has also benefitted Japanese consumers -- they now not only have greater choice but also enjoy lower prices for cellular phone services. Initiation and monthly service fees are now one-third the previous rates.
Medical Technology: The Clinton Administration concluded a Framework Agreement with Japan covering public sector procurement of medical technology (such as MRI machines and CT scanners) on November 1, 1994. A review of the agreement in July 1995 determined that the Japanese Government has made good progress toward implementing the transparent and open procurement procedures called for in the agreement. Since the agreement was signed, U.S. exports of medical technology to Japan have increased over 35 percent, to nearly $2 billion in 1995.
Rice: The Clinton Administration targeted rice in the Uruguay Round negotiations. Although American medium-grain rice has been highly rated on quality by the Japanese Food Agency, imported rice was virtually banned in Japan for decades. With the successful conclusion of the Uruguay Round, Japan finally opened its market to imported rice and American rice has been well-received by Japanese consumers.
In 1993, a major failure of the rice crop in Japan led to the first taste of American rice for many Japanese consumers. Since that time, U.S. farmers have sold $287 million of rice exports to Japan, more than the previous 25 years combined. And although Japan's rice crop subsequently recovered, U.S. exports of rice to Japan in 1995 totalled $31 million.
Apples: The Clinton Administration targeted apples as one of its first bilateral trade initiatives with Japan, and an agreement was concluded on September 13, 1993. Since that time, the Administration has continued to work with Japanese officials to increase the number of U.S. apple growers and apple varieties certified to supply the Japanese market. These sustained efforts are beginning to pay off: where U.S. apple exports to Japan were once banned, apple exports approached $7 million in 1995. Meanwhile, imports of apples have brought lower prices to Japanese consumers, which will help increase overall apple sales in Japan.
Copper: The Clinton Administration targeted copper in the Uruguay Round negotiations. Since the Uruguay Round Agreement was signed, U.S. exports of copper to Japan have increased by over 80 percent, to $350 million in 1995. The United States sells 1.5 times as much copper to Japan as to the European Union, and U.S. exports of copper to Japan are growing faster than those to the European Union.
Chemicals: The Clinton Administration targeted chemicals in the Uruguay Round negotiations. Since the Uruguay Round Agreement was signed, U.S. exports of chemicals to Japan have grown nearly 25 percent, reaching $2.8 billion in 1995.
Flat Glass: Until the flat glass agreement was signed in January 1995, Japan's $4.5 billion market for flat glass had been dominated by an oligopoly of 3 Japanese producers. U.S. exports of flat glass to Japan doubled in 1995 to nearly 5 million square meters.
By the last quarter of 1995, the Japanese current account surplus had fallen below 2 percent as a share of the economy. Moreover, Consensus Economics forecasts continued reduction in Japan's current account surplus from $110 billion in 1995 to $88 billion in 1996 and $69 billion in 1997.
The improvement in the trade deficit in part reflects economic recovery in Japan. While we welcome the improvement in the bilateral deficit, it is important to note that the bilateral deficit is not a scorecard for trade policy. The goal of our trade policy is to improve the economic well-being of Americans by expanding trade.
For more information, please contact Michele Jolin at 202-395-5084.