ABSTRACT
The auto dispute was the last of the major sectoral trade problems between the United States and Japan. Since then the arena of American concern has shifted from the particular to the general. Even as the Japanese government implemented measures to improve market access, it consistently maintained that the trade imbalance was, mainly, the result of the high value of the American dollar. With the massive increase in US federal spending, together with the tax cuts in 1981, the first year of the Reagan administration, the US deficits have literally soared. During this same period, the Japanese government succeeded in bringing down the yearly deficits with strict fiscal austerity. This period also corresponds to the rapid deterioration of the trade imbalance between the two countries. Ever since the global trade imbalance became a threat to the system, the surplus countries of Europe and Japan argued on the need to take joint action to bring about exchange-rate changes.
