Dispute With Japan Tilts U.S. to Europe : Trade War Worries Asia
International Herald Tribune
May 23, 1995
Michael Richardson 

With the United States and Japan preparing for tough talks in their dispute over cars and auto parts, Asian countries have warned that a trans-Pacific trade war could lead to an economic alliance between the United States and Europe that would put Asia at a serious disadvantage.

Analysts said Monday there was also concern in the region that a protracted confrontation between Washington and Tokyo would fuel protectionist sentiment in the West against export-oriented East Asian nations, many of which have large trade surpluses with both America and the European Union.

Following warnings by the United States of sanctions against Japanese luxury car imports unless Japan took action to open its automobile market, Lee Kuan Yew, Singapore's senior minister, called on Tokyo to lead the way for a general lowering of import barriers in Asia.

"East Asian countries should not be seen as free-riders, abusing the generosity of the industrialized world," he said at a conference Friday in Tokyo. "The U.S. and Europe will no longer tolerate mercantilist practices that stress exports and restrict imports."

Singapore and Hong Kong are the only two economies in East Asia with very low tariff and nontariff barriers.

Mr. Lee said Tokyo would be "shortsighted" to continue its tactics of exhausting negotiations before yielding minimal concessions.

"A U.S. that finds itself frustrated in Asia could look to Europe instead," he said. "The U.S. already has in place trans-Atlantic institutions in defense, security and politics, and could extend such institutions into economic areas."

Mr. Lee was referring to increasing discussion by officials and opinion-makers in America and Europe on a possible North Atlantic free-trade area.

Such an accord would bring together the 15 European Union members and the three members of the North American Free Trade Agreement - the United States, Canada and Mexico - to create a trading bloc with a combined annual output of more than $10 trillion and a population of over 770 million.

While major trans-Atlantic differences over agriculture, steel and aircraft subsidies would have to be ironed out, some Western officials see the proposal as an important element in a strategy to force down barriers to trade and investment in Asia and other areas of the developing world.

Western proponents of an Atlantic free- trade zone say it would help galvanize global trade liberalization.

But Asian countries, especially those with relatively high import barriers, are wary of the plan. They fear it could be used to restrict their access to American and European markets if they did not agree to terms laid down by the West for cutting import barriers to goods and services, protecting intellectual property rights and conforming to labor and environmental standards that would undercut their competitive advantage.

Prime Minister Mahathir bin Mohamad of Malaysia said that European and North American antagonism towards Asian economic expansion "is going to figure a lot in the future of Asia."

One possible development, he said, is that world trade would be managed by the EU and NAFTA nations, which would "come together to form the world's biggest trading bloc."

"With their trading clout," Mr. Mahathir said, "the EU-NAFTA confederation could dictate terms to the rest of the world."

Kenneth S. Courtis, senior economist at Deutsche Bank Capital Markets (Asia) Ltd. in Tokyo, said that U.S. frustration with Japan, China and some other East Asian countries, over market access and other issues was "extremely high."

But he said the United States also knew that economic growth prospects for Europe were much less promising than for Asia.

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