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. The phenomenal growth of the Japanese trade surplus with the United States in the 1980s created a new set of conditions, fuelling the growth of protectionism. However, it must be recognized that the ballooning of the Japanese trade surplus did not result from the proliferation of import restrictive policies, but that did not prevent the rise in demand for retaliatory protection. It was also unfortunate that bilateral trade imbalances had become the focus of concern, but that was, perhaps, understandable since the US-Japan trade imbalance appeared to be representative of their general trading positions. Japan’s surplus was not restricted only to the United States, and the US deficit with Japan, too, was part of the general picture. Furthermore, it was this bilateral nexus which accounted for a large portion of the overall surplus and deficit of Japan and the United States respectively. This led to a widely held belief in such impressionistic solutions that correcting the bilateral imbalance would resolve the overall problem. The pressure came from the United States, but Japanese policies too reflected an appreciation of the problems that their trade surpluses were creating for the stability of the system.
