On August 15, 1971, President Richard M. Nixon revealed a nationalistic plan to contend with the domestic and international economic problems of the United States, many of them caused by the emergence of Japan as a trade competitor. An international payments imbalance, an overvalued dollar, a shrinking trade surplus, inflation, and import competition led him to impose a ten percent import surcharge and suspend the dollar's convertibility into gold. Protectionism and shutting of the gold window stunned United States allies, particularly Japan. The U.S. unilaterally undercut the Bretton Woods monetary system of fixed exchange rates that helped stabilize the yen and seemingly veered from decades of adherence to the liberal trade principles which had benefited Japanese exports. Such action so worried Japan that observers there labeled the August announcement the second Nixon Shock. Nixon's moves led to the Smithsonian Agreement of December, 1971, which paved the way within a few years for floating exchange rates and thus closed the Bretton Woods era. Higher tariffs exacerbated existing trade tensions between the U.S. and Japan, which were already sparring over textile trade policies. In short, the decisions of 1971 reverberated throughout the global economic system, as well as the cold war alliance. Perhaps the most significant implication was the clear sign that Japan had assumed a role, alongside the United States, as a dominating player in the world economy.
Thus, the American-Japanese economic relationship in the transformative period of the Nixon-Ford years requires much research. Historians need a better understanding of the decision-making processes, bureaucratic relationships, U.S.-Japan negotiating sessions, and American perceptions of Japan's policy goals by drawing on archival material. Political scientists, economists, and participants have dominated the writing on this subject, using mainly secondary sources or public documents (speeches, congressional reports and testimony, commission reports), newspaper accounts, statistical reports, and interviews. Recent histories of monetary and trade policies have drawn on these resources (and added to the interview base) as well as on documentation from the Nixon presidential library project. Yet studies have generally not plumbed various (classified) holdings of key agencies - State, Treasury, Labor, Commerce, Special Trade Representative, National Security Council - nor the papers of legislators and business groups. By not relying on these sources, we are neither able to open new avenues of enquiry into the period not confirm previous research on many issues. In short, the historical document base has been flimsier than the more extensive theoretical work on U.S.-Japanese econonic relations.
With a growth rate twice that of other industrialized nations in the 1960s, Japan emerged as a force in international trade and finance by the time Nixon took office. By 1970, Japan had become one of the five largest members of the International Monetary Fund. A low inflation rate and export prices, along with good quality and design, quadrupled its sales abroad in the 1960s, and by one-third more from 1969 to 1971. Exports far outpaced imports and led to an overall trade surplus of $4 billion by 1970 that, incredibly, nearly doubled to $8 billion the next year. Such growth prompted acrimony with major trade partners. Japan grabbed larger market shares from America, France, and Britain. By 1970, Tokyo accounted for over 15% of U.S. imports, and this penetration, along with Japanese barriers to American products, reversed a small U.S. export surplus with Japan in the early 1960s to a $1 billion deficit by the end of the decade. By 1971, this imbalance was over $3 billion and the next year the U.S. trade deficit with Japan stood at more than $4 billion.
Japanese prosperity influenced U.S. policies in the monetary and trade systems. The undervalued yen was truly an anachronism, and the threat of a gold drain a great fear for Americans. Policymakers and economists suggested such remedies as depreciation of the dollar or floating exchange rates away from the gold peg. In addition, protectionism in both nations created trade disputes. The cold war liberal trade consensus did not defeat traditional American protectionism, nor discourage politicians from resorting to import restraints for electoral purposes. And Japan became their target by the late 1960s. The country had reaped large export dividends at the Kennedy round of the General Agreement on Tariffs and Trade (GATT), from 1964 to 1967, receiving concessions under most-favored nation (MFN) treatment but not opening its markets to an equal degree. Japan had earlier agreed to voluntary export restraints (VERs) for politically sensitive exports such as textiles and steel but stood by quietly at trade negotiations as America focused on lowering European barriers. But U.S. trade and monetary problems in the late 1960s moved Nixon toward protectionism and compelling Japan to appreciate the yen, which would make Japanese exports more expensive. This pressure propelled the United States-Japan relationship into a new era.
A major influence on this new relationship was the close link of the domestic and foreign economies. Nixon and his counterpart, Prime Minister Eisaku Sato, faced opposition at home to internationalist economic policies as well as domestic economic difficulties, namely inflation in consumer prices. To be sure, the two nations suffered from some different maladies (in the American case, growing unemployment; in Japan's, social demands for better housing and transportation and a lagging per capita income), but both also had come to realize their mutual dependence in economic affairs. What was most worrisome to the Americans, however, was the increasing imbalance in recent years in economic growth, foreign trade levels, and the balance of payments position prompted by Japanese economic power. That development forced U.S.-Japanese monetary and trade not only into a conflict at the negotiating level but made Japan a target of domestic observers and interest groups who blamed U.S. troubles on a new predator.
And money and trade patterns showed there was some validity to the claim that Japan was a danger. U.S. imports skyrocketed during the Nixon years due to American inflation but also the undervalued yen and the competitive edge of certain products (textiles). Similarly, U.S. exports to Japan slowed in part because of inflation and yen undervaluation, but also because of Japan's formal and informal import restrictions. Peter G. Peterson, the Executive Director of the administration's Council on International Economic Policy, was reminded well before the second Nixon Shock "that foreign economic policy . . . relates very closely to domestic economic policy."1
Thus, economic relations threatened to spill over into the diplomatic and political arenas, raising the specter of conflict between two long-time allies. While Japanese power seemed menacing, administration officials faced up to the problem of dealing with this challenge. They simply confronted, however, a nation that perceived and did things differently than the United States. As a member of the American embassy in Tokyo cabled in the first months of Nixon's tenure, "the Japanese Government and the Japanese business community's basic approach to international economic relations, and foreign trade in particular, varies markedly from that of the U.S. and even from the principles of such international organizations as the GATT and OECD to which both countries belong." Japan's trade policy "remains one of isolationism"; restrictive and protective. The unwillingness to devalue the yen also indicated a different approach. Resistance to trade and monetary liberalization in Japan meant that solutions would take a long time, and that in all likelihood, "table thumping" would be counterproductive.2 The Nixon administration, its patience worn by 1971 and under pressure at home, would grow more aggressive while also remaining in the tradition of internationalist generosity. America and Japan had entered a transformative phase during the Nixon years, and so had U.S. foreign economic policy.
The major point of focus for research on the Nixon years in monetary and trade policies in regard to Japan involves the extent to which Tokyo entered the calculations of American policymakers. The Japanese side has received attention, particularly in Robert Angel, Explaining Economic Policy Failure, a study of Japanese decision-making leading to the Smithsonian Agreement of December 1917. Critical to the U.S. side is his investigation of the impact of American pressure on Japanese policymakers. Atsushi Kusano, The Two Nixon Shocks, argues that both nations were suspicious of each other because of the textile wrangle, the China Shock, and an impression in Japan that Nixon had unfairly singled the country out as a scapegoat for American problems. These conclusions are not surprising, but the author shows that while Nixon believed Japan would not act unless pressured in such a "rude" manner, the president underestimated the impact in Japan of stirring up economic nationalist sentiment and prompting changes in Japanese politics. Whether Nixon (or Ford) realized the impact was so great is a good question. The balanced and informative memoirs of U.S. ambassador Armin Meyer, Assignment: Tokyo, points out that Japan was suffering from a recession when the second Nixon Shock arrived. Yet Tokyo not only was guilty of its own violations of free-trade principles but the undervalued yen justified outcries from the United States. There was no doubt, however, that internationalist free-traders looked at the Nixon Shock in horror. Former NSC staffer C. Fred Bergsten, in an article in Foreign Affairs in early 1972, called the New Economic Policy unnecessarily drastic, a throwback to mercantilism, and a catalyst to a possible international trade war. He advised an alignment of exchange rates, meaningful negotiations for reform of the world trade and monetary systems, and a halt to Nixon's pandering to protectionist and nationalist domestic pressures.
Regarding Japan, however, analysis of the American policy process and decisions has been incomplete. To be sure, Angel does discuss the American side, but his study aims at Japanese decision-making. Also, Paul Volcker and Toyoo Gyohten, Changing Fortunes, presents the insights of two officials into the bureaucratic relationships and personalities in U.S.-Japan monetary relations. Volcker was the key Treasury advisor in the Nixon Shock decisions, and his contribution reveals his frequent surprise and disappointment in the demise of the Bretton Woods system. He reveals his reformist tendencies and was also deeply concerned about Treasury Secretary John Connally's economic nationalism. The sweeping analysis of the monetary system by Robert Solomon, The International Monetary System, a former official who served in the Federal Reserve, CEA, and OECD, also provides background. Solomon was clearly a Bretton Woods reformer (as opposed to Treasury Department economic nationalists), and his study is particularly strong on the structural changes in the monetary system. It also focuses more on international organizations and Europe than on Japan, although his short paper, The United States and Japan in the International Monetary System, reveals the consensus of promoting more flexible exchange rates or liberal use of the SDR mechanism among American and Japanese negotiators at the various IMF meetings.3
Theoreticians have grappled with the various levels of decision-making. John Odell, U.S. International Monetary Policy, argues that neither domestic or bureaucratic politics had significant effects on Nixon's decisions. Instead, a combination of global market conditions, declining American power, and influence of ideas and beliefs held by officials on whether to reform the monetary regime or coerce a change dictated choices. Joanne Gowa, Closing the Gold Window, takes issue with Odell. She argues that Treasury Department economic nationalists, including the Volcker Group, placed domestic interests over the maintenance of the international monetary regime when it decided to suspend gold convertibility. Gowa resists the notion that American monetary policy was insulated from social and political pressures, and that global, structural influences and the decline of U.S. power dictated the American approach to monetary affairs (as regime theorists believe). Gowa also questions the bureaucratic policy model, claiming that there was no power struggle within the Nixon administration, but rather a consensus that it was better to destroy Bretton Woods than lose autonomy over domestic economic decisions. Japan is not a focus in these books, which are based on a handful of declassified document as well as interviews. Supporting her conclusions that the Nixon administration prioritized domestic over international economic policies, the survey by David P. Calleo, The Imperious Economy, studies the interaction of U.S. inflation and domestic policies on the international trade and monetary systems. Calleo argues that Nixon faced greater global economic problems than his immediate predecessors, but still sought to maintain U.S. hegemony by neomercantilist policies that safeguarded domestic interests rather than Bretton Woods regime maintenance.
Regarding monetary relations, it is clear that surging Japanese exports and the unwillingness of America to continue its indulgence toward Japan (and Japan's unwillingness to remain a plaint ally) played a major role in leading many experts inside and outside of the new administration to question the efficacy of a fixed dollar exchange rate. Led by the Treasury Department, the U.S. pushed for closing the gold window (instead of Bretton Woods reform toward floating exchange rates) and yen revaluation (instead of dollar depreciation by changing the price of gold) in dealing with the Japanese challenge. It is necessary to explore the impact of Japan in the recommendations of the anti-Treasury reformists in the CEA (Hendrik Houthakker), Federal Reserve Board (Arthur Burns), IMF (William Dale), NSC (C. Fred Bergsten), and an internationalist faction in Congress (Democrats Henry Reuss, Wilbur Mills, Carl Albert, George McGovern, and Republican Jacob Javits) which urged depreciation. The same goes for the key post-election task forces, namely the crucial Volcker Group, which recommended shutting the gold window. That action would eventually affect the Japanese, who had never bought gold from the United States but depended instead on holding dollars. A large price increase of gold, however, would cause Japan to lose relative to those nations holding gold, and prompt it to cash in dollars at the new price and refuse to hold dollars in reserve in the future.4
Before the August 1971 announcement, Japan issued an eight-point program in June to reduce its payments surplus, with the hope of resisting yen revaluation from 360 yen/dollar at all costs. This program involved import liberalization, tariff preferences and increased aid for poor nations, accelerated tariff and NTB cuts, promotion of capital investments, a review of export incentives, and introduction of "orderly marketing" plans for exports. Secretary of State William Rogers and Commerce Secretary Maurice Stans responded that the program was insufficient, and Nixon joined the chorus in early July, several days before the China Shock announcement. Research on U.S. considerations of Japan at this early stage (January 1969-June 1971), would provide needed background to the Camp David that led to the second Nixon Shock.
Of special importance would be a determination of the extent to which participants were concerned about the impact of economic nationalism, expressed by the suspension of convertibility and the import surcharge, on Japan's power, economy, and relations with America. Clearly, notes taken at Camp David reveal such nationalism. For instance, as William Safire reported, when Volcker raised the issue of the sanctity of gold and public sentiment about a "cross of gold", President Nixon retorted, "Bryan ran four times and lost." Connally, moreover, preferred not to place American policy in the "hands of the money changers" but instead, retain control with an eye to domestic implications. H.R. Haldeman's diary and Safire's notes provide a look into the Camp David meetings. They reveal the determination of the administration to act boldly but also an uncertainty about the effects of the gold and import surcharge measures.5
Related to these avenues of investigation is another issue: whether Japan was the main target of American decisions after the August announcement when the U.S. maneuvered to get a realignment of exchange rates. Financial and trade markets were in turmoil during these four months (Japan's stock market tumbled over 10%) and Tokyo was bitter over Connally's demand for exchange rate realignment, reduced Japanese trade barriers, and greater burden-sharing of defense commitments. In talks with Japanese officials, the administration sought yen revaluation by 20-25%. Nixon's pressure paid off, as Finance Minister Mikio Mizuta announced after a bold but doomed effort to purchase dollars that Japan's 22-year support for the 360 yen/dollar would end. The revaluation, just before the Smithsonian conference, amounted to a 12.3% appreciation from the old gold parity. Japan expected, in return, an end to the import surcharge. Whether America considered yen revaluation, as well as progress on the eight-point program, as a quid pro quo on the surcharge is an important question to answer.6
Why the U.S. did not set a target date to end the surcharge (and possibly renew dollar convertibility) was the key question after Japan floated the yen. Japan claimed that the tariffs violated GATT multilateral principles. Yet interestingly, the State Department, CEA, Nixon, and free-trade lobbies such as the Emergency Committee on American Trade, led by Nixon ally Donald Kendall of Pepsico, appeared just as insistent as the Treasury in yen revaluation and a lowering of Japanese import barriers. Confirmation of an uncomfortable consensus inside and outside of the administration on monetary policy toward Japan is necessary.
Still, many academics, monetary reformers, Democrats, and others urged the administration to change the price of gold and end the surcharge rather than rely on European and Japanese revaluation. Discussion began in October 1971 on realignment of currencies by other nations so that America could reach it objective of shifting its payments balance by $13 billion. Connally remained tough, although Treasury records should reveal the full extent of how Japan figured into his strategy on realignment, as well as the extent of his domestic political concerns and economic nationalism, both of which James Reston argues were critical to understanding him.7
In November 1971, "Typhoon Connally" visited a wary Japan, following his advance team led by Paul McCracken, and records of meetings (and accounts by Ambassador Armin Meyer) with the Japanese finance ministry and Prime Minister Sato should also be revealing on the American position. Connally was conciliatory but also adamant that Japan had to cooperate with America. Japan also believed that Connally sought an alignment agreement first with Japan as leverage with the Europeans. Indeed, at the G-10 meeting in Rome a few weeks later, Connally and Mazuta waited for a response on revaluation from the Europeans. It would be worthwhile to determine if America had strong-armed or persuaded Japan to agree to yen revaluation and then unite to confront the Common Market.8
The strong-arm theory might be more valid. Prior to the Smithsonian meeting, when Japan resisted demands for trade liberalization, STR William Eberle informed the Japanese that trade policies could not be separated from monetary problems. Tokyo pledged to implement its eight-point program, but dissent existed within the Japanese delegation. The U.S. pursued again more import liberalization, larger agricultural import quotas, and reduction in Japanese tariff rates. But once the monetary agreement was reached to increase the value of the yen by nearly 17% (to 308 yen/dollar), the Japanese suspended trade talks. Mizuta resisted any greater appreciation, and Japanese bureaucrats complained about their isolation in the face of U.S.-European demands. The key question at this stage is whether America was bent on isolating Japan, or intimidating Japan with the scare-tactic of isolation, in order to get yen appreciation and prompt European revaluation, too.9
The final area for exploration in monetary affairs is the post-Smithsonian Agreement period through 1973, when the Bretton Woods system ended and the floating exchange rate regime came into existence. In 1972, Japan still enjoyed a huge trade surplus despite the yen revaluation. Volcker thus urged monetarist (floater) Secretary of Treasury George Shultz that Japan needed to revalue 10% further in conjunction with a 10% U.S. devaluation against gold. At a Nixon-Tanaka summit in Hawaii in September 1972, the U.S. pushed for further yen appreciation and trade liberalization. Tanaka agreed to buy Lockheed planes, but resisted the revaluation that would stymie his domestic expansionist plans. More arm-twisting ensued, as America pledged to make a deal with the Europeans on currency if Japan was not forthcoming. Volcker secretly talked with Finance Minister Kiichi Aichi in Tokyo early February 1973 about these matters. Japan assented to floating the yen, which appreciated 17%, and the dollar was devalued as gold began to rise. Bretton Woods was thus undermined, and members suggested varying approaches to a new monetary regime.
Nixon administration free-market monetarists debated conservers of Bretton Woods over the structure of this order. Japan again awaited U.S. reforms, but American policymakers believed that Tokyo could not be counted on in monetary affairs because of its inclination toward neomercantilism. Still, Tohoo Gyohten claims that Japan played its first substantive role in international monetary reform from 1972-1974.
In monetary affairs, the following are key issues:
1) U.S.-Japan interaction: The extent to which U.S. believed that Japan was responsible for solving American payments problems must be a focus. After all, while Europe was crucial, Japan was forced to adjust the yen. Would the second Nixon Shock have occurred if not for U.S.-Japanese economic problems? Since State Department officials were not present at Camp David in August 1971, although internationalist "economists" were (Volcker, Burns, McCracken), did other agencies understand the resistance in Japan to yen revaluation? Did U.S. leaders think that they could apply "foreign pressure" to change Japanese yen policies? Did Nixon underestimate the nationalist response to the August announcement in Japan? Did he believe America had leverage, through its wealth and military power, to force Japan to comply with his wishes? Is it possible to prioritize the international and domestic factors that guided decisions in monetary affairs? Did U.S. policymakers, like many commentators, believe that Japan had a special formula for success through its economic practices and structure? With yen revaluation, did the administration understand it now had less leverage to push for greater market access in Japan? Was the Smithsonian Agreement a positive influence on U.S.-Japanese relations? Did America appreciate Japan's new influential role over international monetary affairs as Bretton Woods ended?
2) Regime theory: The hegemonic behavior of the United States toward Japan must be analyzed. Was Japan viewed as an obvious or easy target for U.S. pressure? Did America use the threat of a U.S.-European bloc or other intimidation to gang up on Japan? What did American behavior toward Japan in the Bretton Woods demise reveal about the expression of U.S. power in foreign economic affairs? Did Nixon believe that American leadership and power would benefit from abandoning Bretton Woods? Did America's "hegemonic decline" mean a closure of the monetary (and trade) regimes? Did "hegemonic stability" in the new, floating rates regime assure more openness? Did the new regime enhance cooperation between the two nations?
3) Bureaucratic Politics: A scholarly debate exists over whether the U.S. seriously pressured Japan to revalue the yen to ease pressure on U.S. payments. Gowa raises the question by claiming that even some CEA officials sought such pressure, but other scholars have placed blame for the American nationalistic response on the Treasury. Camp David meeting notes seem to bear out her argument.1010 The Treasury Department rebuked the call by one member of the state department, Philip Trezise, for revaluation of yen for a time, seeking fixed rates. Gowa has made a strong case that the Treasury Department ultimately guided U.S. monetary policy. What agencies represented Japanese views in the American bureaucracy? Did nationalists meet resistance on their policies (not just on closing the gold window but on forcing yen revaluation) from foreign policy agencies such as the State Department or NSC? Or was there an unholy alliance, which included even free-traders, with Treasury nationalism? Did officials see other options available?
The input of Nixon and Kissinger, at the top of the foreign policy bureaucracy, would also be important to flesh out. Nixon confesses in his memoirs that even he was shocked by Connally's "big play" plan of August 1971 of declaring "total war on all economic fronts" to solve American economic problems. He focuses on the domestic initiatives, but implies that the British request to convert $3 billion of their reserves into gold forced his hand.11 Was that true, or was the president part of the Connally consensus of focusing on domestic and nationalist aims? (Again, Safire's meeting notes seem to indicate that Nixon understood the gist of Connally's vigorous assertions).
Kissinger laments Connally's "frontal assault" tactics, particularly on supposed coddlers of foreign interests, that undermined the previous White House staff system in which Peter Peterson's expertise was used effectively. Petersen sought import restrictions against Japan if it did not revalue the yen, but Connally wanted the import surcharge. Kissinger claims he labored to bring the State Department into the discussions as a moderating influence, and at least wanted the CIEP to consider various options. His view is that Nixon understood the implications of Connally's nationalism (and the president revelled in the publicity of his bold announcement). Connally had too much clout for the CIEP, which Kissinger confessed he did not trust his judgment to take a position on the shock. Yet he soon realized that Connally and Nixon were playing to the crowd at home, and Kissinger intervened to continue "hard-nosed negotiating" with Europe and Japan but stop before upsetting alliance relations. To this end, he convinced Nixon to form a small group composed of Connally, McCracken, George Shultz, and himself (with Petersen excluded due to Connally's objections) that articulated policy to be followed in negotiations.12
Did Nixon "unleash" Connally and other "heavy hitters" (who sought to maintain fixed exchange rates but proceed unilaterally to shore up the American economy) on Burns, McCracken, and State Department officials who hoped to work out problems by increasing the price of gold or by multilateral consulation, and not by floating.13 How effective was Kissinger in bringing foreign policy aspects, and particularly Japanese intersts, into consideration?
4) Domestic arena: Did Congress express concerns about Japan in monetary affairs, or about the effects on Japan of yen revaluation?14 Did policymakers understand the difficulties of and debates over yen revaluation for Japanese elected and bureaucratic officials? And how did domestic economic factors affect U.S. monetary policy toward Japan?
Intertwined with monetary issues, U.S.-Japanese trade problems stemmed from the (political) desire to restrain imports from Japan, particularly textiles, and the (economic) need to ease Japanese protectionism against American products and investments. In the turbulent Nixon/Ford years, many Americans tilted away from traditional postwar trade liberalism for the first time. Indeed, many pondered whether American-Japanese trade policies were incompatible due to the two nations' different domestic political-economic requirements, processes, and structures.
Still, officials were extremely cautious about overly criticizing Japan and diverging from traditional free-trade. As one bureaucrat wrote, "[p]rotectionism is bad for our image abroad, bad for our economy at home and capable of vitiating our world leadership stance for which we have spent billions of dollars annually - militarily, economically, and in the space program."15 Drawing on the work of Chalmers Johnson and others on these institutional differences, Stephen Krasner writes that the market-driven U.S. economy determined transactions by price, while Japan's "developmental state" prevented foreign penetration by a dense private-public network. Acceptance by America of this fact, and adjustments on its part, were necessary.16 In short, the United States had to contend with the Japanese, for as Philip Trezise has written, "[c]hange came rather abruptly" in its economic relationship with Japan. Tokyo's enormous trade surplus with America by the Nixon years transformed its image as a deficient, developing nation into one of emerging economic giant and "export phenomenon."17
Japan also restricted U.S. exports and investments. It maintained quotas on 120 categories of imports, most prohibited under GATT, and its enormous and growing trade surplus made Washington increasingly unforgiving of this protectionism. Japan had taken advantage of the lack of authority under American trade law at the Kennedy round to withhold MFN treatment from countries that did not make reciprocal tariff concessions. The Nixon administration pushed for inclusion of such authority in a new trade bill, the 1974 Trade Reform Act, as well as authorization to limit imports from nations which restricted U.S. investments overseas. Economists and the foreign policy executive despised such strong-arm tactics, but times had changed.
Just before Nixon's inauguration, Lyndon Johnson announced a three-year VER on steel from Japan and Europe. A week later, Nixon asked Maurice Stans to do the same for textiles. That effort absorbed two summit conferences, two ministerial conferences, and nine major negotiations for nearly three years due, wrote U. Alexis Johnson, to "gross mismanagement on both sides." Both nations let the textile issue blossom into a political crisis in which they became "pliant tools" of domestic industry pressure tactics.18 The "textile wrangle" dominated U.S.-Japanese trade relations in Nixon's first term.
By far the most thorough study of the textile issue is I.M. Destler, Haruhiro Fukui, and Hideo Sato, The Textile Wrangle, an examination from the bureaucratic, congressional, interest group, international, and both American and Japanese foreign policy angles. The book asks important questions about the U.S.-Japanese economic relationship and reveals the internal and external influences on trade decision-making. No issue remains unexplored, although the authors' use of qualifying words in their analysis, either because they were protecting sources or did not have firsthand accounts and precise records of meetings, points to the need to validate their account with archival sources. Gerald Meier, Problems of Trade Policy, is a textbook which surprisingly provides useful sources for the textile issue, including reprints of congressional testimony, newspaper reports, communications between U.S. and Japanese participants, aide-memoires, statements, and letters. It also places the textile issue in an international context, and explores an interesting question of why Nixon did not choose federal adjustment assistance, instead of difficult bilateral negotiations, as an answer to domestic textile import problems.
Memoirs provide interesting insights. The memoir of former ambassador to Japan, and Nixon's undersecretary of state for political affairs, U. Alexis Johnson, The Right Hand of Power, reveals Sato's bind at home. Johnson never was able to discover why the prime minister made pledges on textiles he could not keep, but he does not doubt Sato's sincerity nor the "non-substance" of the textile issue, a matter promulgated only, in his view, for political reasons by Nixon and bungled for political reasons by the Japanese. Armin Meyer agrees, and indicts the U.S. side for not knowing exactly what it wanted from Japan. Furthermore, he lauds Sato's efforts at mitigating the effects of the conflict on U.S.-Japanese relations. But Meyer also argues that blaming Nixon's 1968 campaign pledge for precipitating the textile wrangle is unfair, for textiles had received aid for over a decade in America and was just as politically important in Japan.
Theoretical works also serve to point out the global and domestic elements in the textile case. Vinod Aggarwal, Liberal Protectionism, analyzes the creation and maintenance of the international (and not just bilateral U.S.-Japanese) textile regime. Aggarwal emphasizes external sources, international system forces, and hegemonic behavior on the formation of the global textile regime. He factors in, but gives less weight to, other levels of analysis. Thus, his use of regime theory explains the role of the hegemonic U.S. in shaping the textile order and how and why the regime changed over two decades yet is less attentive to domestic and ideological inputs into the transformation. Articles by John Gerard Ruggie and Charles Lipson in Stephen D. Krasner, International Regimes, however, provide more theory for these aspects. Ruggie's theory of "embedded liberalism" holds that U.S. trade policy remained liberal as long as nations collaborated on safeguards for domestic interests, an insight that might prove especially valuable once archives support the textile case.
The Destler et al. book is so thorough that a detailed look at the textile negotiations is unnecessary, although it should be mentioned that substantial documentation on the textile case is available in the Richard Nixon Collection at the National Archives II. In short, the American goal in textile trade was to limit man-made and wool textile imports, as cotton textiles had been constrained under the LTA of 1962 from Asia. Japan was the initial target; Hong Kong, South Korea, and Taiwan would be left for later. Nixon had campaigned in 1968 to limit textile imports, and thus believed his hands were tied.
The president occupied a position within the administration between the protectionists in the Commerce Department, led by Maurice Stans and his White House staff, who cared less for the impact on Japan of restraints and more for the domestic economy and political gains to be earned, and the free-traders of the foreign policy bureaucracy (State, NSC, STR), who were concerned about bilateral relations and America's role as the global leader of the liberal trade regime. (This division seemingly paralleled the nationalist-internationalist split on monetary policy). Opposing rigid, legislated quotas on textiles but seeking a U.S.-Japan deal that would satisfy the industry and its powerful congressional bloc, Nixon leaned toward protectionism for electoral reasons. He tapped his aides immediately to plan for negotiations with Japan, and from the first meeting on January 20, 1969 under Robert Ellsworth through the final agreement, the various agencies, interest groups, legislators, staff members, and other individuals maneuvered for a favorable resolution. A bureaucratic struggle that weakened the office of the STR and strengthened the Commerce Department boosted the textile protectionists. Minutes of the Ellsworth meeting and Greenspan task force on foreign economic policy would effectively reveal the divisions as well as bear light on the importance of Japan to U.S. trade policy.
The textile negotiations proceeded in Spring 1969, and involved attempts at beginning an international trade conference to forge a multilateral agreement. Repeated bilateral talks with Japan under the leadership of top U.S. officials and White House assistants followed this effort, although the liberal traders appeared to grow in influence. Stans' tough, protectionist stance preceded missions by Peter Flanigan, David Kennedy in March 1971, various State Department members such as U. Alexis Johnson and Trezise, George Schultz, then Henry Kissinger, and even Wilbur Mills in separate talks. Private sector leaders such as Michael Daniels and Kendall also tried to shape the various agreements, adding to an amalgam of participants, plans, counter-proposals, and disputes that Destler et al. describe skillfully while posing key questions. Still, the Japanese were clearly resistant and wary of U.S. policies. As Prime Minister Sato responded during a luncheon conversation with David Rockefeller, Kendall, and others, the textile problem was "essentially a political problem and the US request [for restraints] is contrary to free trade principles."19
Questions can be divided into categories:
Bureaucratic: Why was progress so difficult in the textile wrangle, particularly considering how much effort went into the issue? What were the reasons that bureaucrats gave for initiating negotiations, and why were most (except for the Commerce Department) willing to be so patient with Japan? Why were textiles separated out from other foreign economic issues? Why did the administration (except for Commerce) seek a VER rather than quota legislation or adjustment assistance? In Spring-Summer 1971, bureaucratic changes were initiated. How did the appointment of Connally, who attacked Japanese trade barriers and in August of a tough STR, William Eberle, affect the textile negotiations? Offsetting these appointments was the report of the Williams Commission (U.S. Commission on International Trade and Investment) in July that lamented trade barriers but also criticized the politicization of trade.
Interest Groups: Did business lobbies have a measured effect on the negotiations or Nixon's textile policy? Did labor, particularly in light of the AFL-CIO's shift to protectionism by the early 1970s? What pressures were exerted on Congress? Did cross-national interest groups have an effect? For instance, in early 1971, U. Alexis Johnson organized a high-level business group, the Advisory Council on U.S.-Japan Economic Relations (chaired by Pan-American chief Najeeb Halaby), that triggered a Japanese counterpart. It was designed to permit free-trade interests to be heard above the din of protectionists. Helen Milner has found that "antiprotectionist" firms were sometimes effective in pressuring the state toward free-trade.20 Did such interests do so in dealing with Japan? Also, Armin Meyer describes the activities of the American Chamber of Commerce in Japan, a group of businessmen who were sensitive to Japanese culture and behavior. Did these groups have influence over policy? Do government and textile lobby archives reveal the access to the White House for interest groups, particularly for reelection purposes?21
Did Nixon subordinate international and strategic concerns to domestic concerns? Was the trade policy decision-making process more open, indicating a weaker state, in comparison to monetary policy-making, which most scholars view as more insulated, indicating a strong state?22 Did the U.S. perceive Japan as a strong state which could effectively resist American pressures?
Politics: Did the textile case enter into Nixon's calculations about mid-term elections or his own re-election? Did officials explicitly link the southern strategy to textile talks? Was Japan used as a convenient scapegoat for American economic problems for political reasons? Did Nixon understand that he was in a stronger position than Sato at home regarding textiles? Did he realize that, according to Richard Cooper, his "extraordinary insensitivity" on textiles, the surcharge, and monetary brinksmanship caused internal political difficulties for Sato and unnecessarily elevated economic matters to leading issues between the two nations?23
Was the backing of quotas more a symbolic warning to take industry heat off Congress than an acceptable plan for the administration? How did Nixon and Mills reconcile their quota support with VER negotiations and their opposition to protectionism? How did inter-branch bargaining affect the negotiations with Japan? Did Mill's bargaining with Japan represent the seeds of an inter-branch deal that would have resolved the textile wrangle? Clearly, Nixon saw Mills as a competitor on the issue. Privately, he had earned the congressman's cooperation, but by mid-1971, Mills seemed ready to step in. The White House worried that barring a satisfactory response to industry complaints, textile producers would turn to Mills to "work out a deal." Furthermore, Congress might rebel against the administration's trade bill.24
Individual/Ideology: How important was Nixon in the decision-making process? Did he assign high or low priority to monetary and trade affairs? How did Nixon square textile protectionism with his cold war free-trade position and free-market stance? What U.S. national interests did Nixon believe were at stake? Did he worry about or was he aware of the effects of his policy on Japanese power, economic vitality, and internal politics?
Marvin and Bernard Kalb claim that Nixon had nothing but contempt for the Japanese, especially after Sato welched on his 1969 summit promise to limit textile exports, and Kissinger, too, denigrated the Japanese as "little Sony salesman" who focused too much on trade. And, the Kalbs accuse Nixon of knowing how deleterious to Japan his August 15 policies would be, yet he proceeded anyway, without prior consultation. By doing so, he supposedly furthered the demise of Sato's government.25 Are these indictments accurate? Why was Kissinger, a free-trader and unsympathetic (and uninterested in) the textile industry, willing to concede so much to the industry? And how did free-traders view Japan, a nation that followed a successful neomercantilist, protectionist policy, contrary to their approach? Did protectionists and nationalists, despite their proclivity to circumvent foreign policy considerations, worry about being too tough on Japan? Did personalities, misjudgments, and shrewd pragmatism matter in decisions and policy? How did rivalries (e.g., Nixon versus Mills) affect the textile wrangle?26
Security: Nixon fully understood, and told the Japanese so, that he feared a protectionist backlash in Congress and the "dangers of a trade war" because of textiles that might make difficult the Okinawa reversion plan.27 Did Kissinger and Nixon realize how important the Okinawa reversion was for Sato, and how less important textiles was for the prime minister? For what reasons was the Okinawa-textile deal kept secret, and indeed negotiated as a backchannel bargain? How did imminent Senate consideration of the Okinawa reversion treaty affect the textile talks? Did Kissinger view the textile case as a threat to American security interests or alliance with Japan? What was the effect of the first Nixon (China) Shock on the negotiations? Was there, in short, a fear that economic nationalism, promoted by the second Nixon Shock and the textile wrangle, would undermine the alliance with Japan? Did the administration subordinate trade/monetary policies toward Japan to security policies?
International Strategy: Why did America pick out Japan as the target, preferring a bilateral, selective VER agreement over a multilateral, category coverage accord? Why did the textile case begin as a high-profile negotiation; what were the bureaucratic positions on making the case public as opposed to more private diplomacy? Was multilateralism a viable option in the textile case? Was summit diplomacy the desired course for Nixon? Why did either leader have confidence that talks could succeed, when they were both targets of interest group pressure? And why did both permit a dramatic breakoff of the negotiations in June 1970, considering that harsher quotas were the only likely alternative? After all, Maurice Stans abandoned the negotiations by February 1971, when he told the president "that our long waltz with the Japanese on textiles is over for all practical purposes." The Commerce secretary suggested not suspending talks, but stepping in with a textile quota.28
Was the American refusal to back the Flanigan-Ushiba agreement merely a tactic to get more from Japan, or a product of Nixon's domestic political concerns? Did the textile wrangle affect the GATT regime? And was the second Nixon Shock designed, in part, to intimidate the Japanese on textiles? Did Nixon realize that the MITI minister would have trouble negotiating under such pressure? Did the U.S. understand that the Japanese Diet would not act without consultations with ministers, and did America acknowledge the factions within the LDP? In short, did America understand the constraints on the Japanese policymaking process?29
Negotiating strategy: Of relevance to some of the aforementioned questions is the possible application to the textile negotiations of the two-level games theory on international bargaining. Is it possible to weight the importance of the international table and domestic politics, and were American negotiators constrained simultaneously both by what Japan would accept and what domestic constituencies would ratify? An answer would, at least,
address the debate over "society-centered" vs. state-centered influences in diplomacy. The domestic arena was obviously crucial for Nixon.
Thus, what was America's "win-set", or the agreements that domestic constituencies would accept? Was this win-set too small for realistic international agreement or unfair for Japan? Did Japan understand the changing parameters of America's win-set? Would increasing the win-set have given Nixon less leverage with Japan? Did the administration try to manipulate domestic and foreign win-sets, and did such action bring gains at the bargaining table? Did the domestic win-set (possible quotas, for instance) allow the administration to make credible threats when Japan balked, and eventually conclude the agreement? Was Nixon able to act independently of constituent pressures?
And, what was Nixon's "acceptability-set", or the international agreements that would further his domestic goals? Did Nixon behave as a statesman-as-agent, indicating no conflict between state and society, thus making ratification at home likely? Or was he a statesman-as-dove, in which the acceptability-set was partially outside the win-set and closer to Japan's win-set (he was against legislative quotas, for instance)? Or was he a statesman-as-hawk, in which the acceptability-set was also partially outside the win-set at home but further from Japan's win-set (such as hardening on quotas when Sato could not get ratification of the 1969 summit agreement)? Did he use domestic pressure to portray himself as holding back a rabid domestic constituency? Did the U.S. purposely remain tough as an "outside force", or "black ship", to permit Sato to explain away his concessions to America as forced upon him? Finally, did domestic textile groups (importers as well as industry and labor) also adopt two-level strategies?
If two-level games theory applies, then historians must consider that neither domestic pressures nor national security concerns wholly explain the diplomatic decision-making and power structure in the United States. Answers to many of questions in the textile case may be strictly political. Not only had Nixon pledged to aid the American industry, but a VER with Japan would be enough to satisfy protectionists and maintain the overarching liberal trade approach that had created consensus in Congress. Thus, it is no surprise that the administration rejected a low-profile approach to Japan in order to publicize its attempts to earn points at home and boost the president's re-election chances. In addition, protectionism seemed to attract more votes than liberal trade. Two-level games theory might, therefore, provide a framework to gauge the political angle of the textile case.
Outcomes: Was the textile wrangle necessary? Who won and lost? What were its effects on U.S.-Japan economic relations and broader security and diplomatic cooperation? What were its effects on textile trade and the subsequent forging of the GATT Multifiber Accord (MFA) in 1973-1974? The MFA restricted textiles in ways forbidded by GATT as an umbrella for bilateral quotas and orderly growth. America excluded certain textiles from its negotiating list at the Tokyo Round of GATT (1973-79) and still retained the highest textile tariffs in the world, although it eventually offered to cut these by over one-quarter. Also, how did the textile industry react to the textile accord? And Congress?
Several studies which place textile policy within the overall context of trade policy have emerged recently to address America's difficulties with Japan over imports and exports. The central debate, which addresses the larger argument between protectionists and free-traders, concerns whether Japan was an unfair trader or merely a scapegoat for American deficiencies.30 Steve Dryden, Trade Warriors, focuses four chapters on the Nixon/Ford years in a study of the STR, the individuals who occupied the position, and their bureaucratic struggles. Since the book is concerned with bureaucratic decision-making and covers the period of the 1960s to the present, it is much less comprehensive on international negotiations, trade ideology, and perceptions of Japan, though his use of Nixon and Ford archives sets his book apart from older studies. Dryden applauds the transformation of the STR by the mid-1970s into a pragmatic defender of American domestic and export interests but a firm supporter of the liberal trade order.
Dryden has support for his views from several sources, including U. Alexis Johnson's memoirs, Bergsten's articles, and by F.C. Langdon, Japan's Foreign Policy, which implies that American pressure on textiles, market access for automobiles, and quota restrictions were severe and insensitive to the Japanese, considering their substantial efforts at trade liberali-zation during the Sato years. Armin Meyer's memoirs also point out that America's predicaments with Japan was its own fault; Japan was simply more energetic, efficient, and wise in producing and promoting its goods. Painful internal adjustments by the U.S., and not protectionism, were in order to regain competitiveness. Krasner's study on U.S.-Japanese trade does not judge fairness, but implies that America's pursuit of liberalism did not recognize the fundamental institutional differences between the two nations. A policy of specific reciprocity in trade transactions would acknowledge the diverse political economies and open certain markets in both nations. All cringe at scapegoating Japan for America's problems.31 And all contrast starkly with the recent populist-nationalist interpretation of trade policy.
Alfred E. Eckes, Jr., Opening America's Market, is representative of this approach. Sweeping in scope, the book does not devote an entire chapter to the Nixon/Ford years yet still addresses such issues as textile imports, the 1974 Trade Act and the rejuvenation of the escape clause, and use of antidumping measures. Drawing on an enormous amount of archival sources both at home and abroad, Eckes attempts to show that Nixon and Ford typified the postwar approach of placing American trade policy in the service of diplomacy, to the detriment of domestic producers and workers. His book, therefore, should prod scholars to examine more closely the impact of trade policy at home due to trade agreements with foreign countries, and especially Japan. Eckes argues that protectionism should be considered on equal terms with (in his view) the free-trade dogma of the past half century.
His study builds on other attacks on postwar American economic relations with Japan. One is Pat Choate, Agents of Influence, which laments Japanese lobbying influence in American politics in the 1980s but provides some background that shows how Nixon and Kissinger neglected the importance of trade policy and thus turned over the American textile and television market to Japan. Another is Clyde Prestowitz, Trading Places, which indicts American leaders for giving away U.S. power and competitive edges. The book provides a useful section on television competition, another on the various bureaucratic entities and their rivalries on trade policy, and perhaps the most valuable regarding U.S.-Japanese mutual perceptions. Americans believed Japan had become an unfair trader by not opening its markets to U.S. exports.
Studies of the internal dynamics of American trade policy-making provide insights into the debate over how to approach Japan. Robert A. Pastor, Congress and the Politics of U.S. Foreign Economic Policy, contains a chapter on the Trade Reform Act of 1974 in this book that tests various decision-making models, including structural, bureaucratic politics, congressional log-rolling, and interest group pressure. He argues for the inter-branch politics paradigm. As IR theorists have shown, the Executive branch focused on foreign policy and export expansion; the Legislative branch (and constituent agencies such as the USDA) on protecting domestic import-competitors. In the interbranch paradigm, both branches compromised with each other to maintain a liberal trade policy in the face of intense protectionist pressures in 1974. His study points to the importance of examining perceptions and behavior in both branches on the issue of trade policy toward Japan.
Judith Goldstein, Ideas, Interests, and American Trade Policy, roots protectionism in the persistence of prior ideas on trade, and not in external or interest group pressures. Yet her framework might also point to the possibility that policymakers were trapped in earlier conceptions of Japan as a relatively weak or vulnerable nation, and thus explain why oftentimes, American policy did not live up to tough rhetoric against Japanese behavior.
On later issues, the sources are scarcer. Joan E. Twiggs, The Tokyo Round of Multilateral Trade Negotiations, looks at these GATT negotiations, the first to follow the Kennedy round. It is a decidedly free-trade view of the issues; Twiggs seeks reform of the GATT system to make it more open. There is no particular focus on Japan, although contributions by Trezise and Destler in Michael Blaker, ed., The Politics of Trade, discuss American approaches to assuring Japanese trade multilateralism, beginning at the Tokyo Round. Destler particularly explores the formation and implementation of negotiating policy by a close look at the passage of the Trade Reform Act.
In May 1969, the Central Intelligence Agency gave credence to the unfair trader school of interpretation. An intelligence memorandum summed up a thorough study of Japan's import practices by concluding that, despite Tokyo's attempt "to give the impression that is is moving apace toward a more liberal trade posture", that effort "has been largely illusory." Japan had lowered many tariffs, but only on carefully selected items. And informal administrative controls imposed by a myriad of committees, government bureacuracies, and big business representatives made "a slight opening" to Japanese markets the best scenario for the future. Such lack of pentration promised to "exasperate Japan's trading partners."32
Preparing to embark on a trade mission to the Far East in the summer, Secretary of Commerce Stans was prepared to demand that the Japanese cooperate in exchange rate realignment and "rid itself" entirely "of its whole mercantilistic network of public and private, overt and covert import restrictions and help right the present U.S. deficit with Japan that puts a serious strain on our trading relationships." But Stans made only "limited progress" with Japan, essentially vague promises to liberalize restrictions on imports and investments.33
Such resistance and obtuseness led to administration anger. By Fall 1971, it was clear that the U.S. would run its first overall trade deficit of century, and George Shultz's announcement that "Santa Claus is dead" signaled, at least publicly, a more assertive stance on trade. Imports hurt the trade imbalance, but Congress and the administration preferred, save for textiles and a few other products, to reverse the deficit by fighting foreign restrictions on American exports rather than pursue protectionist measures. At a high-level meeting in November 1971, a month before the Smithsonian meeting, Connally sought a "New Deal, a Fair Deal for America in the world" and was unwilling to end the import surcharge. Nixon claimed that "I would give us hell" if I were a Democrat for constantly giving away trade concessions. For "twenty-five years the United States has not bargained hard for a better position in world trade, the goddam (sic) State Department hasn't done its job. We're changing the rules of the game", he threatened.34
Seizing the initiative for increasing American market access was William Eberle, STR from 1971-1974, who echoed Connally's tough stance on trade matters. Bitter talks with the Japanese in Honolulu in December 1971 took place when he learned that Japan's farmers refused to open markets wider to American penetration and threatened to stop buying U.S. feed grain. Nonetheless, Eberle departed after demanding that Japan shave $1 billion off its bilateral surplus with the United States by removing quotas and lowering tariffs on computers, semiconductors, and agricultural commodities.35
In return, America would lift its import surcharge. Tensions over such brinksmanship characterized U.S.-Japanese trade relations heading into the Smithsonian monetary meetings, although Japan got off the hook by yen revaluation and withdrew its tariff and quota offers. Yet on February 9, 1972, as Congress debated tougher dollar legislation, Eberle announced an agreement with Japan to relax its import barriers on cars, computers, aircraft, livestock, oranges, and soybeans, although most of this had been agreed to before the Nixon Shock. Why the U.S. was willing to accept these concessions is an important question, particularly because Eberle and the revitalized STR office appeared willing to keep the pressure on Japan.36
Indeed, the STR asked GATT in May 1972 for authority to retaliate against Japanese quotas which violated GATT rules. Nicknamed "Typhoon Eberle" during his visit to Japan that same month, Eberle believed Japan posed as the most serious commercial challenge to America. By 1972, an increasing number of commentators warned about "Japan Inc." and its predatory trade practices, thus commencing concerns which persist today that Japan was not playing by the same trade and economic rules as America. The Japanese stood their ground by claiming that yen appreciation and import liberalization showed their free-trade bent and fair dealing. Also, Nixon's pre-election domestic expansionary priming of the American economy did not help in stemming imports. Japan did opt for a now common response of providing "emergency measures" in opening its market for certain products to stimulate its economy, perhaps in reaction to welcome outside pressure.
But the CIA intelligence division reported in May 1972 that Japan's effort at liberalizing its import quotas, for example, had had a minimal impact on U.S. and world trade. Some American industries would benefit from the Eight Point program, however "small" their breakthrough into Japanese markets, but in general, "the United States has not benefited much from Japan's liberalization program to date, and it is far from certain that major gains would come from any new round" of negotiations.37 In fact, the CIA concluded that Japan's new Seven Point program of July 1972 (and more multi-point programs followed in ensuing years), focused more than the Eight Point agenda on encouraging capital outflows and reducing the nation's trade surplus. It advocated encouraging imports and slowing exports, but, concluded the CIA, represented "little in the way of new policy initiatives" and would still leave intact a growing U.S. deficit with Tokyo.38
American formulation of new trade legislation and trade talks through GATT was shaped by the import and export policies of Japan that helped boost Tokyo's trade surplus with the U.S. toward $4 billion by 1973. Under congressional pressure, the administration had moved ponderously to enforce existing anti-dumping statutes, particularly in response to an influx of Japanese televisions. Nixon also had Eberle demand from Prime Minister Tanaka at Hakone in July more Japanese imports of American manufactures or else the U.S. would close its doors to Japan's sophisticated exports. Even some State Department officials, so frustrated with the seeming lack of Japanese commitments to open its markets, advised cutting off discussions with Japan.
Secretly, the Japanese agreed to remove import and investment controls on American electronics exports, though yielding Eberle little to show publicly for his visit. A Nixon-Tanaka summit following these talks also brought few substantial inroads on the Japanese surplus; Tanaka issued an empty pledge to buy over a billion dollars more in U.S. goods, empty because Japan had planned to purchase these products anyway. And, apparently Nixon did not press Tanaka on reducing the surplus, discussing security affairs instead at the summit. As scholars have surmised, Japan argued convincingly that import restrictions and export expansion were necessary to its survival, and America was willing to buy that argument for foreign policy reasons. Further recriminations against Japanese market access restraints from 1973 onward from U.S. businessmen arose, but it seems clear that the NSC/State Department approach of placing U.S.-Japanese trade relations in the service of diplomacy had triumphed.
The opening of the Tokyo Round of GATT in Fall 1973, and the passage of the Trade Reform Act of 1974, exhibited an American recognition of Japan's important role in trade. The extent to which Japan was a target in the negotiations and renewal of trade legislation still needs to be researched, but the very site of Tokyo as the base of negotiations acknowledged both that Japan was a major player in the international economy and had new obligations because of its importance. These responsibilities included a requirement to adhere to GATT rules and principles of liberal trade.
At the GATT talks, America also labored to open up protectionist European markets to Japanese exports, a long-time effort to divert Japan's trade away from the United States. In inter-branch bargaining over the Trade Reform Act, Japan was also a factor. Nixon officials strived to show that they had won important market-opening concessions from Japan as a means of easing the bill's passage. The Senate Finance Committee, under its chairman Russell Long, was the key congressional player. Long appeared satisfied with the effort, although the new law called for retaliation against nations that refused to grant reciprocal concessions at trade negotiations and made resort to protectionism easier. And, for the first time, the STR (in 1975, Frederick Dent, a South Carolina textile representative), would also enjoy cabinet rank. Both the GATT round and trade bill require more research to uncover the influence of Japan on American calculations and policies.39
The pattern of market-access demands, complaints about unfair trade practices, and "emergency" concessions by Japan opened a new era in U.S.-Japanese trade relations, and raises the following questions:
1) U.S.-Japan relations: Why did the U.S. officials and firms allow significant Japanese protectionism, and why were they then satisfied by stopgap "emergency" measures? Why was America so myopic about Japan and not push Japan to open up more? What role did alliance and diplomatic concerns play in tempering demands on Japan? Did each nation recognize the fundamental institutional differences of the other? Were such alternatives to trade liberalism or protectionism as specific reciprocity considered, especially by the United States?
2) Domestic arena: What pressures did the Nixon/Ford administrations receive from Congress on their trade policies toward Japan? How important was business and labor pressure?40 Was Japan a major target of domestic constituents or of Congress in the Trade Reform Act proceedings? In what sectors and products (high-tech, agriculture, raw materials, automobiles, electronics) were remedies to Japanese imports or market access restraints sought, and what leverage was used by the interest groups and legislators concerned on the administrations? Did the Nixon/Ford administrations recognize the domestic constraints on Japanese policymakers? Why did the notion that Japan welcomed outside pressure become an article of faith in American government and business circles? What was effect of 1976 election on U.S.-Japan trade relations, including Jimmy Carter's stance on trade issues?
3) Bureaucracy: What were the differences in opinions toward Japanese import practices within the American bureacracy, and who else backed Eberle's tough stance? Did conflict and consensus among the Executive branch "superpowers" (Treasury, State, and the White House) decide trade policy toward Japan? What influence did the STR and Commerce have on the policy process? Did high-level boards of senior officials have different approaches than the "superpowers" to Japan, such as Peter Peterson's Council on International Economic Policy, formed in January 1971, George Shultz's Council on Economic Policy, created in late 1972, and President Gerald Ford's Economic Policy Board, led by Treasury Secretary William Simon and White House assistant L. William Seidman?41
4) Tokyo Round: What were the trade issues at the Tokyo Round between the U.S. and Japan? Did America approach Japan differently at the round than it did the Europeans? Can two-level game theory be applied to the negotiations?
Trade (and monetary) conflict between the two nations persisted into the Gerald R. Ford presidency, and, of course, well beyond. Japan's denial of adequate access for American agriculture, particularly citrus and beef, touched off recrimination from Congress and producers. Meanwhile, imports of a large and vast array of commodities from Japan provoked outcries. Some protests, as in the case of specialty steel, led to high-level talks and, eventually, Japanese orderly marketing arrangements, or voluntary quotas similar to the textile quantitative deals. Automobiles, by this time, drew much attention, for in 1975, the two top Japanese makes led all other foreign car sales in America, surpassing even Volkswagen.
In addition, economic summit meetings, whether between Ford and Prime Minister Takeo Miki in 1976, or industrial nations' meetings at Rambouillet (November 1975) and Puerto Rico (June 1976), addressed the growing trade problems of the two nations. Regardless of Japan's slumping economy in the Ford years, Japan's exports to the United States remained stable while American exports to Japan continued to fight their way into markets.
In light of these trade problems, and a growing American trade deficit with its second biggest trade partner (behind Canada), pressure was also brought to bear on Japan to revalue its yen.42 The second Nixon shock may have receded into the past, remembered only by the participants, but the problems it addressed and raised persisted well after.
Aggarwal, Vinod. Liberal Protectionism: The International Politics of Organized Textile Trade. Berkely, 1985.
Angel, Robert C. Explaining Economic Policy Failure: Japan in the 1969-1971 International Monetary Crisis. New York, 1991.
Bergsten, C. Fred. "Crisis in U.S. Trade Policy". Foreign Affairs 49 (July 1971): 619-635.
Bergsten, C. Fred. "The New Economics and U.S. Foreign Policy". Foreign Affairs 50 (January 1972): 199-222.
Calleo, David P. "Since 1961: American Power in a New World Economy" in Economics and World Power: An Assessment of American Diplomacy Since 1789, eds. William H. Becker and Samuel F. Wells, Jr. New York, 1984.
Calleo, David P. The Imperious Economy. Cambridge, MA, 1982.
Choate, Pat. Agents of Influence. New York, 1990.
Cooper, Richard N. "Trade Policy is Foreign Policy". Foreign Policy 9 (Winter 1972-73): 18-36.
Destler, I.M., Haruhiro Fukui, and Hideo Sato. The Textile Wrangle: Conflict in Japanese-American Relations, 1969-1971. Ithaca, 1979.
Destler, I.M. "United States Trade Policymaking during the Tokyo Round" in Michael Blaker, ed. The Politics of Trade: US and Japanese Policymaking for the Gatt Negotiations. New York, 1978.
Dryden, Steve. Trade Warriors: USTR and the American Crusade for Free Trade. Oxford, 1995.
Eckes, Alfred E., Jr. Opening America's Market: U.S. Foreign Trade Policy Since 1776. Chapel Hill, 1995.
Goldstein, Judith. Ideas, Interests, and American Trade Policy. Ithaca, 1993.
Gowa, Joanne. Closing the Gold Window: Domestic Politics and the End of Bretton Woods. Ithaca, 1983.
Johnson, U. Alexis. The Right Hand of Power. Englewood Cliffs, 1984.
Krasner, Stephen D. "Asymmetries in Japanese-American Trade: The Case for Specific Reciprocity", Policy Papers in International Affairs, No. 32, Institute of International Studies (Berkeley, 1987).
Krasner, Stephen D. "United States Commercial and Monetary Policy: Unravelling the Paradox of External Strength and Internal Weakness" in Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States. Madison, 1978.
Kusano, Atsushi. "Two Nixon Shocks and Japan-U.S. Relations",
Princeton University Research Monograph, No. 50. Princeton, 1987.
Lake, David A. Power, Protection, and Free Trade: International Sources of U.S. Commercial Strategy, 1887-1939. Ithaca, 1988.
Langdon, F.C. Japan's Foreign Policy. Vancouver, 1973.
Lipson, Charles "The Transformation of Trade: The Sources and Effects of Regime Change" in International Regimes, ed. Stephen D. Krasner. Ithaca, 1983.
Meier, Gerald M. Problems of Trade Policy. Oxford, 1973.
Meyer, Armin H. Assignment: Tokyo. An Ambassador's Journal. Indianapolis, 1974.
Odell, John S. U.S. International Monetary Policy: Markets, Power, and Ideas as Sources of Change. (Princeton, 1982).
Pastor, Robert A. Congress and the Politics of U.S. Foreign Economic Policy, 1929-1976. Berkeley, 1980.
Prestowitz, Clyde. Trading Places: How We Allowed Japan to Take the Lead. New York, 1988.
Roosa, Robert V. The United States and Japan in the International Monetary System, 1946-1985. Group of Thirty Occasional Papers 21. New York, 1986.
Solomon, Robert. The International Monetary System, 1945-1981, 2nd ed. New York, 1982.
John Gerard Ruggie. "International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order" in International Regimes, ed. Stephen D. Krasner. Ithaca, 1983.
Trezise, Philip H. "The Evolution of United States-Japan Relations" in Japan and the United States: Economic and Political Adversaries, ed. Leon Hollerman. Boulder, 1980.
Trezise, Philip H. "US-Japan Trade: The Bilateral Connection" in Michael Blaker, ed. The Politics of Trade: US and Japanese Policymaking for the GATT Negotiations. New York, 1978.
Twiggs, Joan E. The Tokyo Round of Multilateral Trade Negotiations: A Case Study in Building Domestic Support for Diplomacy. Lanham, 1987.
Volcker, Paul A. and Toyoo Gyohten, Changing Fortunes: The World's Money and the Threat to American Leadership. New York, 1992.
The following list of topics will aid in answering questions posed in the working paper. Classified and declassified documents are expected to be found in the following locations:
Harry Dent papers (textiles)
Peter Flanigan papers (monetary, textiles, trade legislation and negotiations)
Peter Peterson (textiles, CIEP policy)
White House Central Files (monetary, textiles, trade legislation and negotiations)
White House Subject Files: U.S. Tariff Commission-FG 231; Trade-TA (textiles, televisions, negotiations)
Staff Member and Office Files: Arthur Burns (monetary); CEA: Hendrik Houthakker (monetary); Paul McCracken (monetary)
John Dean/John Ehrlichman/H.R. Haldeman papers (domestic and bureaucratic issues)
Arthur Burns papers (monetary)
Gerald Ford Vice-Presidential papers (monetary, textiles, trade legislation and negotiations)
Robert Hartmann papers (Ford's service in Nixon administration)
CEA records: Paul McCracken papers (monetary); Alan Greenspan
Henry Kissinger Files (textiles)
Marvin Kosters (trade)
Dwight MacDonald (trade)
Charles McCall (trade)
William Seidman (monetary and trade)
RG 16, Agriculture Department (Japanese import controls)
RG 46, Senate Records (quota/trade legislation)
RG 56, Treasury Department (monetary)
RG 59, State Department: Central Decimal Files; Foreign Service Posts: Tokyo (U.S.-Japan relations, trade negotiations)
RG 151, Commerce Department (trade, textiles)
RG 174 Labor Department (trade, textiles)
RG 364, STR (textiles, trade)
National Security Council
Federal Reserve Board records
Carl Albert (Oklahoma University)
Hale Boggs (Tulane University)
Jacob Javits papers (SUNY-Stony Brook)
George McGovern
Wilbur Mills
Henry Reuss papers (University of Wisconsin-Milwaukee)
Russell Long
William Safire (private possession)
Textile organizations: NACM, NTA (Museum of American Textile History, North Andover, MA)
Tom Connally
C. Fred Bergsten
Ralph Bryant
Arthur Burns
William Eberle
Gerald Ford
U. Alexis Johnson
Donald Kendall
Henry Kissinger
George McGovern
Armin Meyer
Stanley Nehmer
Philip Tresize
Maurice Stans
Paul Volcker
Task Force on Foreign Economic Policy, (Haberler) minutes and report, 1968-1969
Volcker Group, Monetary Affairs in Treasury Dept. (affiliated agencies include Treasury, Federal Reserve, State, CEA, and staff of Assistant for National Security Affairs), proceedings and report, 1969-71
William B. Dale working group within Volcker Group (affiliated agencies include Federal Reserve Bank of New York, staff of Federal Reserve Board of Governors, and White House), 1969
NSC decisions on monetary policy, C. Fred Bergsten, 1969-70
National Security Study Memorandum (NSSM) 7, 1/21/69.
Formation of Advisory Council on US-Japan Economic Relations, U. Alexis Johnson supervising, early 1971
Executive branch discussions on monetary affairs, May-August 1971
JEC report on monetary affairs, 3/29/71
JEC, Foreign Economic Policy Subcommittee, 6/71
JEC, Subcommittee on International Exchange and Payments hearings (7/71) and report, 8/6/71
Japan Eight-Point Program, 6/71
Camp David minutes, 8/13-15/71
Kissinger-Nixon meeting (included monetary issues), 8/14/71
Negotiations on yen revaluation/surcharge, August-December, 1971: 8/18, Connally/Ushiba talks;
8/29, Tresize to Japan; 9/4, 9/15, 9/26 IMF/G-10 discussions; 9/10 Connally/Mizuta talks; 9/17, McGovern talks in Japan; 9/25-29, Kendall of ECAT to Japan for talks; 10/15 Connally and dirty float charge; 10/71, realignment talks; McCracken advance visit for Connally visit,11/5; Connally visit to Japan, 11/9-11; Nixon/Connally/Burns meeting, 11/24; Rome G-10 meeting, 11/29-12/1
Kissinger's NSC Senior Review Group meeting, 8/71
Kissinger/Connally/McCracken/Shultz group planning for currency alignment negotiations, 10/71 (this group also met periodically in Spring 1971 on international economic matters)
Congress' views, 9/71
Smithsonian Agreement, G-10, 12/17-18/71
Interagency working group on monetary reform, Jack Bennett, Volcker's Deputy Undersecretary for Monetary Affairs, 3-9/72
Federal Reserve meetings on dollar crisis, 6-7/72
US decision to realign exchange rate, Volcker-Shultz correspondence and interdepartmental meetings, Summer 1972-2/73
Volcker plans for monetary reform, 8-9/72
IMF annual meeting, Shultz realignment scheme, 9/72
Nixon-Tanaka meeting, Hawaii, 9/72
Volcker visit to Tokyo on realignment, 2/7-12/73
Volcker visit to Europe, 2/73
Decisions on 10% dollar devaluation, 2/73
EEC/US/Japan monetary meeting in Paris, 3/9/73
IMF Committee of Twenty meetings, 3-9/73
Oil crisis and monetary reform, 12/73-3/74
Reuss/congressional pressure for floating, Summer-Fall 1974
Rambouillet summit, decisions on floating, 11/75
Puerto Rico summit, 6/76
Nixon campaign strategy on textile, 7-11/68 (individuals include textilemen Roger Milliken, Robert Jackson, Charles Meyers, and Frederick Dent; Harry Dent, Robert Ellsworth); Nixon-industry meeting, 7/68; Nixon-Thurmond telephone call, 8/21/68.
Task Force on Foreign Trade (Alan Greenspan chair), 1968-69
Robert Ellsworth meeting (with Stanley Nehmer, Commerce, John Rehm, Theodore Gates, Harald Malmgren, STR, Greenspan, Harry Dent, White House textile liaison, 1/20/69
Maurice Stans visit to Europe on multilateral textile proposal, 4/69 (US delegation: Nehmer, Dent, Hendrik Houthakker (CEA), Carl Gilbert (STR), Lawrence Fox (Commerce), Joseph Greenwald (State), John Petty (Treasury), Clarence Palmby (USDA), Herbert Blackman (Labor), Gates (STR)
Stans mission to Far East, 5/69; Japan, 5/10-13/69
Stans (Nehmer) report, 6-7/69
Trezise to SecState Rogers on selective coverage, 5 or 6/69
US textile and Wilbur Mills warnings to Japan, 7/69
Ministerial conference, Joint Japan-U.S. Committee on Trade and Economic Affairs, (US delegation: SecState Rogerts, Stans, UDSA Sec Hardin, CEA McCracken, James Beggs (Treasury), Petty, Gilbert, with Aichi, Fukuda, Ohira, Hasegawa), 7/29-31/69
US-Japan bilateral fact-finding (technical) talks, Takahashi mission, (US delegation: Trezise, Nehmer, Blackman, Julius Katz (State), Gates, Murray Chotiner (STR), Robert Pelikan (Treasury), Glenn Tussey, (USDA), 9/16-19/69
Sato "agent" talks with Kissinger on secret textile agreement, 8/69
Aide-memoire to Yoshino (Trezise, Nehmer, Blackman), 10/2/69
Trezise visit to Tokyo for bilateral trade talks, 10/6-9/69
US-Japan textile talks in Geneva (US delegation: Joseph Greenwald, Nehmer, STR. Labor, Commerce, State officials), 11/17-22/69
Nixon-Sato summit, 11/19-21/69
Nixon sends housekeeping trade bill to Congress, 11/18/69
U. Alexis Johnson implementing Nixon-Sato accord, 12/69-2/70: Johnson-Nehmer alliance; First US Proposal (to Yoshino) in Tokyo, 12/9/69; Second US Proposal, 1/70 and Japan rejection, 1/9/70; US observations on Sato's cabinet reshuffling, 1/70; Japan aide-memoire, 2/10/70; Shomoda-Johnson meeting, 2/13/70; Trezise reply to Yoshino, 2/19/70
Nixon pressures from industry, 1970
Mills temporary freeze idea, 1/70
Senator Jacob Javits visit to Tokyo,1/25-28/70
Kendall Plan, 2-3/70: Kendall meetings with Trezise, Marshall Green (State), Stans, Kissinger, 3/70; Kendall visit to Tokyo, 3/11-15, 3/21-24/70
Michael Daniels visit to Tokyo, 3/70
Kissinger Plan, 3/10/70:
Japanese aide-memoire, 3/9/70, and US response, 3/70
US industry denounces Japan, 3/19/70
Stans-Nixon meeting, 4/2/70
Drive for statutory textile quotas, 3-4/70: Thurmond and Mills
Ralph Reid-Miyazawa talks, Tokyo, 4/70
Administration approach to Ways and Means Committee hearings, 4-5/70
Miyazawa-Stans talks, Washington, 6/22-24/70: Stans, Miyazawa, Rogers, Aichi talks, 6/23; Miyazawa-Kendall talks, 6/23
Ways and Means meetings, decisions on quota, 7/7-15/70
Nixon, Mills, Cong. John Byrnes meeting, 7/10/70; administration approaches to quotas, 7-9/70: Houthakker, Stans responses
Geneva textile meetings (led by GATT Director-General Olivier Long, 7/31-8/1/70
Flanigan tapped to lead textile effort, 9/24/70
Thurmond visit to Japan for World Anti-Communist Conference, 9/70
Olivier Long Proposal, Third Proposal, 9/70
Flanigan proposal, 10/70; Miyazawa rejected response, 10/15/70
Uemura mission to NY and Washington, 10/19-22/70
Nixon-Sato summit, 10/24/70
Flanigan (with Bergsten)-Ushiba talks, 11/9-12/30/70
US textile industry pressure, 10-11/70; toughening of Flanigan-Ushiba talks, 12/70
Mills Bill deliberations, 11/70
Secstate Rogers memorandum to Nixon on textiles, 12/12/70
Mills/industry agreement, 12/70-1/71
Michael Daniels visit to Tokyo, 2/7-15/71
Ushiba-Mills meeting, Washington, 2/4/71
Legislative leaders' meeting, White House, 2/26/71
Flanigan-Ushiba meeting, 2/27/71
Administration response to Mills/ Japanese industry proposal, 2/26-3/71: senior policy adviers meeting (Kissinger, Peter Peterson, Shultz, Johnson, Flanigan, Stans, Nixon), 3/8/71; Nixon/Mills meeting, 3/11/71
Administration considerations of Okinawa/textiles linkage, 4/71
Bureaucratic changes: David Kennedy, chief negotiator; Peter Peterson, CIEP (created 1/71) and chief, textile policy.
Peterson/Nixon meeting on trade policy; Connally appointed
First Kennedy mission, to UN Economic Commission for Asia and Far East meeting, 4/20; to Tokyo meetings with Sato and Fukuda, 4/24-26/71; report to White House, 5/12/71
Second Kennedy mission, 5/31-7/15/71; report to Nixon, 7/16/71
Response to Sato cabinet reshuffle, 6-7/71
Williams Commission (US Commission on International Trade and Investment Policy) Report, 7/71
Third Kennedy mission, 7/20/71-8/7/71 (First Nixon Shock); Anthony Jurich continues to other Asian nations
Second Nixon shock, 8/15/71: Trading with the Enemy Act quota arrangement and internal debate, 8/71
STR Gilbert out, 8/71; William Eberle appointed
Eighth ministerial conference, Williamsburg (Rogers, Fukuda, Tanaka, Kennedy), 9/9-11/71; Kennedy-Tanaka meeting, 9/8/71; Nixon-Kennedy meeting, 9/11/71; Nixon-Fukuda meeting, 9/11/71. Trading with the Enemy Act to go into effect.
Jurich ultimatum mission, 9/71: Jurich to Washington, 9/71; Jurich to Tokyo, 9/20/71; US observations on Japanese cabinet debate, 9/21-28/71; Jurich-Tanaka meeting, 9/28/71; Jurich-Tanaka meeting, 9/30/71
Kissinger orders NSC/State report to improve US-Japan economic relations, 9/71; bureaucratic debate over responses to Japan
US readies renewed Kennedy proposal, 10/71
Kennedy to Tokyo, 10/13-15/71. Textile deal, 10/15/71
Stans letter to Tanaka on US requests for tariff cuts, 11/71; Vance-Hartke bill introduced; Senate Finance Cttee also authorizes Nixon to raise surcharge to 15%.
US-Japan trade talks, Honolulu, (US delegation: Eberle chief, assistant secretaries Treasury, State, Commerce, Agriculture), 12/11-12/71
Eberle-Ushiba talks on trade liberalization, 2/72
US request to GATT for action against Japanese protectionism, 5/72; Eberle to Tokyo for trade talks
Eberle-Nixon meeting, 7/21/72; Eberle to Hakone meeting with Tanaka, 7/72; John McNamara (STR)/Malmgren deal on electronics
Ambassador Robert Ingersoll talks with Japanese on trade measures, 8/72
Nixon-Tanaka summit, 8/72
Trade Reform Act planning and passage, 2/73-12/74
Eberle-Nakasone talks, 2/73
Eberle-Japan meetings in Paris, 3/73
US response to MITI plan for liberalization, 6/73
Multi-Fiber Textile Agreement, 1973-74
Tokyo Round of GATT, 1974-79