George R. Packard
President, International University of Japan;
Director of the Reischauer Center for East Asian Studies at the School of Advanced International Studies (SAIS), Johns Hopkins University, President, U.S.-Japan Foundation
George R. Packard was dean of SAIS from 1979 to 1993 and is now director of the Edwin O. Reischauer Center for East Asian Studies as well as professor of East Asian studies at the school. He is also president of the International University of Japan. From 1965 to 1967, he was chief diplomatic correspondent for Newsweek. Prior to that, he served as special assistant to U.S. Ambassador to Japan Edwin O. Reischauer. In March of 1998, he was appointed president of the U.S.-Japan Foundation.
Packard Report - Jun. 1999
As one more sign of how well Japan-US relations are going this year, the US Senate has overwhelmingly rejected a House Bill that would have sharply restricted imports of foreign steel. Behind this seemingly innocuous vote was a clash of powerful interest groups.
The first and most important of these groups was organized labor, represented by the United Steel Workers of America. Big labor has vowed to play a major role in the elections of Year 2000, and has assembled a huge amount of money to promote the candidacies of their political friends and support opponents of their enemies.
The big American steel-makers, backed by the steel-workers, saw foreign steel imports (from Japan, South Korea, Brazil, Russia, China, Indonesia and Thailand) surge to capture some 40% of the domestic steel market in late 1998. They claimed that the foreign-made steel was being dumped at prices below cost and below domestic prices of the maker-country.
Pitted against this influential group were the nation's agricultural interest groups - which included both Republican and Democrats from the farm states. They understood that a protectionist bill would hurt their exports of farm products, and would probably be ruled illegal by the World Trade Organization in any case.
Siding with the farm lobby were the manufacturers such as General Motors who understood that quotas would raise the price of steel at home and reduce their profit margins.
The White House opposed the steel protection bill from the start, but even there one could see divisions: Clinton and his USTR, Charlene Barshevsky as well as Secretary of Commerce William Daley publicly denounced the bill, while Al Gore remained virtually silent until forced to admit publicly and reluctantly on June 21, two days before the Senate vote, that "legislated quotas on steel imports are unnecessary." Gore, who is trying to win major support from labor for his presidential campaign, hoped that no vote would be necessary.
This in turn triggered a Republican swing in favor of the vote: Let the Senate pass the House Bill and then force Clinton to veto it, weakening Al Gore's pro-labor stance.
Indeed, it was not clear how the vote would go just minutes before the final tally on June 22. Recall that the House protectionist bill won by a margin of 289-141. Senate Majority Leader Trent Lott, who had earlier indicated that he might support the protectionist bill, waited until minutes before the vote to declare his opposition.
Interestingly, a flurry of anti-protectionist articles appeared on June 22. On the Washington Post's op-ed page that day, Gary Hufbauer and Erika Wada of Fred Bergsten's pro-free trade Institute for International Economics argued strongly against the bill they called "a rigged lottery that would take $1.5 billion a year from American households, confer more than $1.2 billion of windfall profits on a few firms, yet save the jobs of only 1,700 workers at an annual cost exceeding $800,000 per worker." The New York Times cited the same article in its news columns of June 22.
In the end, it was the farm bloc that turned the tide. They argued convincingly, as Senator Max Baucus (D-Montana) stated, "[the bill] would encourage other countries to retaliate against us, in agriculture and other areas."
The good news for those who care about the US-Japan relationship is that imports of Japanese steel were scarcely mentioned in the press accounts of the final vote on June 22. Indeed, in its coverage of the June 22 vote, the Washington Post never mentioned Japan at all, while the New York Times mentioned it only briefly, along with South Korea and Brazil.
None of this would have been so easy, however, if the US economy were not running so smoothly. A serious recession here might well have brought about a different result.
George R. Packard
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