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United States and Canada

The United States has been Japan's largest economic partner, taking 31.5 percent of its exports, supplying 22.3 percent of its imports, and accounting for 45.9 percent of its direct investment abroad in 1990.

Japan's imports from the United States included both raw materials and manufactured goods. United States agricultural products were a leading import in 1990 (US$8.5 billion as measured by United States export statistics), made up of meat (US$1.5 billion), fish (US$1.8 million), grains (US$2.4 billion), and soybeans (US$8.8 billion). Imports of manufactured goods were mainly in the category of machinery and transportation equipment, rather than consumer goods. In 1990 Japan imported US$11.1 billion of machinery from the United States, of which computers and computer parts (US$3.6 billion) formed the largest single component. In the category of transportation equipment, Japan imported US$3.3 billion of aircraft and parts (automobiles and parts accounted for only US$1.8 billion).

Japan's exports to the United States were almost entirely manufactured goods. Automobiles were by far the largest single category, amounting to US$21.5 billion in 1990, or 24 percent of total Japanese exports to the United States. Automotive parts accounted for another US$10.7 billion. Other major items were office machinery (including computers), which totaled US$8.6 billion in 1990, telecommunications equipment (US$4.1 billion) and power-generating machinery (US$451 million).

From the mid-1960s, the trade balance has been in Japan's favor. According to Japanese data, its surplus with the United States grew from US$380 million in 1970 to nearly US$48 billion in 1988, declining to approximately US$38 billion in 1990. United States data on the trade relationship (which differ slightly because each nation includes transportation costs on the import side but not the export side) also show a rapid deterioration of the imbalance in the 1980s, from a Japanese surplus of US$10 billion in 1980 to one of US$60 billion in 1987, with an improvement to one of US$37.7 billion in 1990.

The general deterioration, and the very modest improvement in the trade balance after the yen rose in value after 1985, contributed greatly to strained economic relations. The United States had pressured Japan to open its markets since the early 1960s, but the intensity of the pressure increased through the 1970s and 1980s.

Tensions were exacerbated by issues specific to particular industries perhaps more than by the trade imbalance in general. Beginning with textiles in the 1950s, a number of Japanese exports to the United States were subject to opposition from United States industry. These complaints generally alleged unfair trading practices, such as dumping (selling at a lower cost than at home, or selling below the cost of production) and patent infringement. The result of negotiations was often Japan's agreement "voluntarily" to restrain exports to the United States. Such agreements applied to a number of products, including color television sets in the late 1970s and automobiles in the 1980s.

Some innovative approaches emerged in the 1980s as United States companies strove to achieve greater access to Japanese markets. MOSS negotiations in 1985 addressed access problems related to four industries: forest products, pharmaceuticals and medical equipment, electronics, and telecommunications equipment and services.

Problems of access to Japanese markets were among the motivations for the United States Trade Act of 1988, which included a provision calling on the president to identify unfair trading partners of the United States and to specify products for negotiation with these countries. In the spring of 1989, Japan was named as an unfair trading partner under this provision and three areas--forest products, telecommunications satellites, and supercomputers--were selected for negotiations. This action exemplified the continuing mood of dissatisfaction over access to Japanese markets at the end of the decade (see Import Policies , this ch.).

At the same time, the United States initiated broad talks concerning the structural factors inhibiting manufactured imports in Japan, in the Structural Impediments Initiative. These talks addressed such areas as the law restraining the growth of large discount store chains in Japan, weak antitrust law enforcement, land taxation that encouraged inefficient farming, and high real estate prices.

As elsewhere, Japan's direct investment in the United States expanded rapidly and is an important new dimension in the countries' relationship. The total value of cumulative investments of this kind was US$8.7 billion in 1980. By 1990 it had grown to US$83.1 billion. United States data identified Japan as the second largest investor in the United States; it had about half the value of investments of Britain, but more than those of the Netherlands, Canada, or West Germany. Much of Japan's investment in the United States in the late 1980s was in the commercial sector, providing the basis for distribution and sale of Japanese exports to the United States. Wholesale and retail distribution accounted for 32.2 percent of all Japanese investments in the United States in 1990, while manufacturing accounted for 20.6 percent. Real estate became a popular investment during the 1980s, with cumulative investments rising to US$15.2 billion by 1988, or 18.4 percent of total direct investment in the United States.

Japan's balance of trade with Canada tends to be in deficit because Canada is a supplier of raw materials to Japan. In 1990 Canada was the destination for 2.3 percent of Japan's exports and the source of 3.6 percent of its imports. Canada is a major supplier of food (particularly wheat), wood and wood pulp, and coal. Japan's deficit with Canada in 1990 was US$1.6 billion.

Data as of January 1994

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Japan Table of Contents