The World Turned Upside Down: America, China, and the Struggle for Global Leadership by Clyde Prestowitz

Author:Clyde Prestowitz [Prestowitz, Clyde]
Language: eng
Format: epub
Tags: 21st Century, Asia, Business & Economics, China, History, International Relations, Political Science, Trade & Tariffs, United States
ISBN: 9780300248494
Google: PIYIEAAAQBAJ
Amazon: B08NZ5B1SL
Publisher: Yale University Press
Published: 2021-01-26T03:00:00+00:00

The Japanese Miracle

Even as early as the late 1950s, and certainly by the mid-1960s, there was clear evidence that the high priests might be worshiping at the wrong altar. Japan after World War II was a country with a lot of inexpensive, relatively unskilled labor and few natural resources. American leaders and economists, in keeping with the orthodox economic doctrine, advised and expected Japan to produce low-tech manufactures such as toys and inexpensive textiles. In 1955, Secretary of State John Foster Dulles advised the Japanese to concentrate on exporting to Southeast Asia and forget about the U.S. market because Japan was incapable of making products Americans would want to buy. The chief U.S. negotiator with Japan on trade, C. Thayer White, in 1954–55 advised Japan to forget about creating an auto industry and simply import cars from America.

By 1964, however, Japan’s shipyards were building half the world’s shipping tonnage, the United States had recorded its first trade deficit with Japan, and the “Japanese Miracle” became widely acclaimed. For example, between 1964 and 1984, Japan’s auto industry captured a quarter of the world market.14

I went to Tokyo in 1965 to study Japanese at Keio University and got to watch the Japanese Miracle unfold. Later, during the Reagan administration, I was counselor to the secretary of commerce, Malcolm Baldrige, and one of the chief U.S. negotiators with Japan during a period of maximum U.S.-Japan trade friction. In this role, I became friends with Naohiro Amaya, a former vice minister of the Ministry of International Trade and Industry (MITI) and one of the key architects of Japan’s postwar “catch-up” industrial policy strategy. He once explained to me the Japanese perspective on economic development and the Anglo-American orthodox trade theory. “We did,” he said, “the opposite of what the American economists said. We violated all the normal concepts. The American view of economics may help business to increase current production or to lower current costs. But research and development are necessary for the future, and it is a gamble. Businessmen are risk averse. They hesitate to take the gamble on new developments. Therefore, if the magic invisible hand cannot drive the enterprise to new developments, the visible hand of the government must do so.”15

One of his colleagues at MITI, K. Otabe, added: “If the theory of international trade were pursued to its ultimate conclusion, the United States would specialize in the production of autos and Japan in the production of tuna.” But this would not create wealth and good-paying jobs for Japan. Therefore, the Japanese government believed that creation of certain industries was “necessary to diversify and promote the development of the Japanese economy.”

But wasn’t Japan a member of the GATT? Didn’t it agree to reduce its protective tariffs as a condition of joining? Didn’t it believe in free trade just like the United States? The answers are yes, yes, and no. Japan did become a member of the GATT in 1955 (at American insistence, over the objections of most European countries), and it

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