Courtesy Reuters

We are now experiencing the third episode of major economic conflict between the United States and Japan in the last 12 years.

The first of these episodes led to the U.S. import surcharge of August 1971, viewed in Japan as the second of the "Nixon shocks" aimed at that country, and a U.S. threat to invoke the "Trading with the Enemy Act" against its chief Pacific ally. The second episode produced major U.S. pressure on Japan during 1977-78 to boost its domestic growth rate, with lasting damage to Japanese confidence in its American connection and immediate impact on the political career of the then Prime Minister, Takeo Fukuda. The third, current, episode promises to be the nastiest yet-with the United States joined as demandeur by the European Community, with racist overtones already creeping into the rhetoric and frustration on both sides of the Pacific, and with obvious spillover onto

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  • C. Fred Bergsten is Director of the new Institute for International Economics in Washington, D.C. He served as Assistant Secretary of the Treasury for International Affairs from January 1977 through January 1981, as a Senior Fellow at the Brookings Institution during 1972-76, and as Assistant for International Economic Affairs on the Senior Staff of the National Security Council from January 1969 through May 1971. He is the author of eleven books on a wide range of international economic issues.
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