Herbert W Armstrong

Last year's economic summit in London was a rather dull affair; since then trade frictions, especially between the U.S. and Japan, have risen alarmingly. While it is predicted that in Bonn cool heads will prevail, below the surface the problems will continue to fester. In THE WALL STREET JOURNAL, last November 6, William R. Cline, senior fellow at the Institute for International Economics in Washington wrote:

The fact is that protection has been on the rise for several years now. In the past, successive postwar negotiations sharply reduced tariffs from their prohibitive (Smoot-Hawley) levels of the 1930s. The Kennedy Round in the 1960s succeeded in reducing the tariff wall around the European Common Market, and the Tokyo Round of the 1970s disciplined non-tariff distortions such as subsidies. Open trade reached its postwar peak in 1974-76 as concern about inflation temporarily peeled away some important quotas (steel, sugar, petroleum, meat). But by 1977 trade protection had begun a relentless upward creep, and major new non­tariff barriers emerged even as tariffs themselves sank to modest levels in the range of 5 percent-10 percent....

The costs of protection are high. User industries (autos) become uncompetitive as they must pay higher prices for protected inputs (steel). Consumers face a narrower range of goods and higher prices as imports are restricted. The Congressional Budget Office has estimated the cost of steel protection at about $180,000 per job saved. Robert Crandall of Brookings estimates that automobile quotas have raised the price of Japanese cars by about $900 and bid up the price of domestic cars by nearly $400 (implying a consumer cost of $4.5 billion yearly)....

But consumers are not organized, and their losses are widely dispersed, while the gains from protection are concentrated among well-organized producers and labor groups in the affected sectors. Politics and special interests dominate U.S. protection policy.... It is difficult for politicians to argue with two million textile-apparel workers, one million auto workers or 500,000 steelworkers.

The April 13, 1985 ECONOMIST took issue with the singling out of Japan as the "bad boy" in the trade crisis, saying, in part:

President Reagan's trade negotiators ought not to be persuaded by a know-nothing Congress into taking up a protectionist blunderbuss in trade disputes with Japan.... It makes much more sense for America to concentrate instead on opening up those markets where it can compete successfully.... It also means more effort from American firms and other foreign grumblers. They will have to strive as hard as Coca-Cola has done in winning 60 percent of the Japanese soft-drinks market. How many foreigners bother to learn Japanese? How many foreign companies have a Japanese on their management team, or a Japanese non-executive director? American Telephone and Telegraph, the deregulated telephone giant, had only one salesman in Japan 18 months ago. Look no farther for an explanation of why it has failed to make much headway into Nippon Telegraph and Telephone's domestic market.

This is mainly a Japanese and American row, but Western Europe cannot afford to remain a spectator until the congress turns its attention to agriculture, and the European common market's protectionist agricultural policy, later this year. For if, despite President Reagan's best efforts, an exasperated congress legislates an import surcharge, it may well be across-the-board, not least because a measure against Japan alone would look racist. The best way Europe can help the Reagan administration to avoid this is to support efforts at the Bonn economic summit next month to have a new round of Gatt trade negotiations in progress by early next year.

The ECONOMIST alluded to the lack of sensitivity often displayed by American exporters in adapting their products to the Japanese market. This was evident the other evening in a televised report from Japan concerning Prime Minister Nakasone's attempt to get his countrymen to buy more U.S.-made products. From man-on-the-street interviews, two impressions were gained. First, "made-in-America" products have a reputation for unreliable and slipshod workmanship (a specific reference was made to appliances), much in the same way Japanese products were considered thirty years ago in the U.S. Secondly, several Japanese consumers complained about the lack of the use of the Japanese language on many U.S. imports, especially food product packages. The camera panned to some familiar American breakfast cereals, the boxes of which contained information only in English.

Then too, it must be realized that although Japan is a modern, quite materialistic society, it is not a consumer society along the American model, as explained in this April 11, 1985 LOS ANGELES TIMES syndicated column by Joseph Kraft:

Inscrutable Oriental mysteries like the Tea Ceremony...come to mind when people speak of "cultural obstacles" to economic cooperation with Japan. But in fact such mundane things as patterns of spending and savings are chiefly involved.... Consider, first, savings. Japan is not a consumer society in the American fashion. There practically no credit cards. Nor are there consumer loans, with tax breaks, to ease the buying of homes or cars or gadgets. On the contrary, the ordinary Japanese make purchases the old-fashioned way. They save the money. [The Japanese per capita savings rate is about 20 percent as compared to the 5-6 percent range for Americans.]

Major banks, with their huge deposits, are closely regulated by government, as a means of guiding the development of industry.

Low-interest loans are available to businesses favored by the bureaucrats in the finance ministry or the ministry of trade and industry. Since Japan is a country almost naked of natural resources, the bureaucrats inevitably favor industries which can export abroad, thus earning the foreign currency the country needs to buy such vital raw materials as food, oil and coal.

Despite Prime Minister Nakasone's nationwide appeal urging Japanese citizens to buy at least $100 of foreign-made products each year, the April 22, 1985 U.S. NEWS & WORLD REPORT, in an article datelined Tokyo and titled "Why Japan Won't Cave In to U.S. Trade Demands," reveals how difficult it is to penetrate the Japanese market, even with good products — and instructions in Japanese.

American hopes that pressure from the U.S. will force Japan to suddenly dismantle its trade barriers are almost certain to evaporate in disappointment. The fact is that Washington...must buck centuries-old, deeply ingrained Japanese customs. To move the Japanese government, Washington must move an entire nation....

"The whole concept that we can turn this around right now is patently ridiculous,” says an American trader who has lived and worked here since 1952. "The vested interests are being shaken and slowly moved, but at a pace too slow for the eye to follow."

That view is echoed by a U.S. diplomat closely involved in the efforts to open Japanese markets to American goods.... "Japan is a relationship society rather than a transactional society," he says. "You cannot alter that kind of a system with a television speech or a batch of general proposals, no matter how well intentioned they are." Beyond specific tariffs or other official barriers to imports, experts here say that the U.S. faces these obstacles: Nearly total domination of the Japanese market by a few dozen giant conglomerates that strongly oppose even token competition — be it from abroad or emerging domestic firms;...a long­ time relationship between business and government that critics say fosters collusion and hinders foreign entry into domestic markets....

Still another means of Establishment control criticized by outsiders is Japan's complicated system of commodity distribution. Directly or indirectly, it also is run by corporate giants. Most retail outlets here are small and rely heavily on a regular source of supply up the distribution ladder. Thus, retailers must maintain relations with wholesalers who need to stay in good stead with big Japanese companies....

It is this determination to hang on to Japanese traditions that could delay indefinitely any meaningful removal of trade barriers.

South Africa Hysteria

A very dangerous mood is beginning to sweep America: "cut all ties to South Africa." In some places the mood — not a general one but one stirred up by radical leftists — approaches near hysteria. Wednesday (April 17) about 3,000 people (not all students by any means) demonstrated at the Berkeley campus of the University of California, demanding that the regents of the university system sell off university-owned stocks in firms that do business in South Africa. Nearly half of the school's students boycotted classes. Radicals who led the anti-war and free speech demonstrations at Cal Berkeley in the 1960s were on hand to instruct today's protestors how best to protest. Students also have been demonstrating at Columbia University in New York City and at Rutgers University in New Jersey.

Anti-apartheid has now become the number one radical cause at the institutions of higher (?) learning. And, of course, the protests continue in front of the South African embassy in Washington. The most notable recent "honorary" arrestee was 17-year-old Amy Carter, daughter of the former president.

In Congress legislation is moving forward to make it illegal to import gold Krugerrand coins into the U.S. (which will certainly increase the value of those already in circulation here), prohibit new investment by U.S. firms doing business in South Africa, and to stop the sale of computers to the government, the latter with the expressed moralistic intention of making it more difficult for the government to enforce its pass laws over the black population. Of course, Japanese or European computers would quickly fill the vacuum left by the withdrawal of U.S. computers from the market. But at least, say the idealists, "U.S. hands would be clean."

On Tuesday, Senators Ted Kennedy of Massachusetts (who has all but announced he'll be running for the White House in 1988) and Lowell Weicker of Connecticut appeared before the Senate Finance Committee to push for the above legislation. Mr. Kennedy made an almost incredulous comparison between Nazi Germany and the current government of South Africa, stating that while the Nazis sent the Jews to the concentration camps, the South Africans were sending blacks to the homelands. (German Jews in the 1930s would have appreciated a homeland!) Senator Weicker drew a similar comparison between the “legalized racism" of the Nazi government and that of South Africa — as if Pretoria were promulgating a set of Nuremberg laws. I witnessed this presentation over the cable "C-Span" network. What was amazing was that nobody on the panel arose to boldly challenge Mr. Kennedy's fallacious charge (except for a rather weak response by one senator). Instead, committee chairman William Proxmire, a co-sponsor of anti-apartheid legislation, publicly praised both senators for their "eloquent testimonies."

South Africa is locked in a no-win situation. The government's decision this week to scrap laws barring marriage and sex across the color line met with a general "nothing has really changed" reaction. (Interestingly enough, a 22-member government committee claimed there is no basis in religion or Scripture for the earlier ban on interracial marriage. The politically-powerful Dutch Reformed Church, which had insisted on the proscription in 1949, has lately undergone considerable liberalization.)

Meanwhile, the liberal Western news media continue to rail against police suppression of unrest in the black townships. Yet, even in the news media, one detects that some reporters have been disturbed over almost unbelievable incidences of black-against-black violence — even using the word "savage" to describe accounts of assaults on black policemen, civic officials and their families. There was one particularly brutal account of a mob chanting black-power slogans, fists raised in the air, dancing around the charred remains of an official they had burned to death. Such developments have almost shaken the beliefs of some journalists in the desirability of a "revolution of the masses."

One of the most astute journalists today is Peregrine Worsthorne, who writes for the SUNDAY TELEGRAPH in Britain. He recently took a trip across South Africa. Here are excerpts of an account he wrote in his newspaper's April 7 edition, wherein he drew a parallel between the Afrikaners and the Americans as they encountered the natives in their midst.

It has always seemed to me that the achievements of the Dutch Puritans who arrived at the Cape 300 years ago are quite as remarkable in their way as those of the English Puritans who arrived at about the same time in North America, the only difference being, of course, that while the latter, in effect, solved their race problem by virtually exterminating the Indians — or practising separate development in reserves from very early on-­ the former came round to cope with their native problem very belatedly — in 1948 when the Nationalists came to power....

Nobody today, needless to say, thinks that the world would be a better place if the Red Indians were to be restored to power in North America. Such a restoration would obviously be an unthinkably perverse interference with the course of progress. Scarcely less retrogressive, in my view — in the light of what is happening in the rest of Africa — is the idea that black power should be restored over South Africa.

Is there any way out of this dilemma? One must desperately hope so, because a race war in South Africa would split Western public opinion more than any other international event since the Spanish Civil War. However much Western Governments might not want to get involved, their peoples would rush in to take sides.

Mr. Worsthorne made some very interesting — and frank — observations on the dilemmas facing South African whites, especially the Afrikaners, in his follow-up diary-style account in the April 14 issue of the SUNDAY TELEGRAPH, entitled: "Botha's Warning to the West."

TUESDAY:...at a brei (barbecue) given on a farm just outside Port Elizabeth, I meet a senior academic from the university — a member of the Broederbond [the semi-secret "bond of brothers " leadership circle].... He gives me a lecture. "The choice for the whites remains 'rule or be ruled.' So it is for the blacks. There can be no power-sharing, any more than there could have been power­ sharing between Cortez and the Aztecs. If the whites talk about power-sharing now, as some of them do, alas, that can only mean that they are becoming resigned to the role of the conquered nation."...

If the rest of the white world wanted to put an end to apartheid, then it in turn would have to conquer white South Africa, since the blacks on their own certainly would never be able to do so, unless President Botha turned out to be a traitor in disguise, as President de Gaulle had turned out to be in Algeria. In that event, the Army might have to take over, in the name of true Afrikanerdom....

SATURDAY: Meeting with State President Botha, whose office, like the man himself, is large and imposing. Having been warned that he does not suffer fools gladly and that he gets very cross if asked questions which demonstrate ignorance of South Africa, I feel more than usually uncertain how to make the most of the 30 minutes or so allotted for the interview....

He hoped that the Western world had drawn the right lesson from Senator Kennedy's visit to South Africa: that the country's black politics were much more complicated than anything dreamt of in Bishop Tutu's philosophy. As for Western pressure to destabilise South Africa, he thought this was playing with fire, since the sparks of a race war in South Arica might well set alight similar conflagrations in other parts of the world, notably in the United States where the racial material was still much more explosively inflammable than American liberals liked to recognise. His advice to the West seemed to be: "Leave ill alone." Dare I admit that I found Botha's earthy realism rather engaging?...

SATURDAY: Fly back to Johannesburg so as to be able to take up [a] challenge to see what black life is like for myself...in Soweto, the largest black township in the country with a population thought to be nearly two million.... We drive to a neon-lit dance hall owned by another friend, Lucky Mick. It is now about 2 a.m. and everybody is in the best of spirits.... Lucky Mick escorts us to the bar, which is a tiny lighted coastal strip, so to speak, beyond which, in the dark, lies a great raging and roaring sea of some 1,000 ululating couples.

So long as one remains within this relatively civilised coastal strip, under Lucky Mick's protection, all is fairly orderly. But being an intrepid reporter, I decide, drink in hand, to explore. What a mistake, since irresistible currents instantly sweep me far away from the safety of the shore. A great black hand grips my arm in a vice and another calmly removes the drink without a word being exchanged. No hostility is shown: [but]...never before in my life have I felt so frightened; or more relieved than when Lucky Mick eventually comes to the rescue....

In many ways the experience induces intense sympathy for the plight of the South African blacks. But it also induces, in my heart at least, an equally intense sympathy for the dimensions of the dilemma faced by South African whites. Perhaps every visitor to South Africa should end his stay in a Soweto dance hall, where the heart of darkness is still reality enough to snuff out all but the hardiest of enlightened illusions.

Such elements of reality, of course, are totally lost on the Berkeley students who are excited about finally having found another cause to get excited about. And they probably paid no attention to the fact that President Botha, on April 7, was invited to address a crowd of two million black people. His message, an appeal for peace and harmony, was-well received by his audience and interrupted often by applause. The crowd was well-dressed and well-behaved. An account of this rather remarkable event moved across our AP wire on April 7:

President P.W. Botha told an Easter assembly of some 2 million black churchgoers that blacks and whites must stand together against "messengers of terror."... Botha was the guest at the annual Easter assembly of the conservative blacks' Zion Christian Church held on a hillside near Moria in northern Transvaal Province. He applauded the church's stand for law and order and called on all blacks and whites to "come together and talk to each other as we are doing now."...

The fundamentalist Zion Christian Church, headed by Bishop Barnabas Lekgenyane, shuns the political activism for black rights followed by most of the Roman Catholic, Anglican and other English-speaking churches.

Botha told the vast audience, "We shall not tolerate people who come from far away with evil minds to kill and injure innocent people. We must not allow them to burn our houses and destroy our property. We must all stand together against these messengers of terror. Our trust in God must enable us to withstand evil with firmness.... In the past, we have not really listened to each other. Let us start listening to each other as we are doing now. We must jointly strive to find out what our problems are. Then we must jointly strive to find solutions to our problems."

A few hundred, or at the most, a few thousand activists demanding "power to the people" (meaning to themselves, like Korab) grab all the headlines, of course, rather than two million people advocating peace and showing respect to their government. The news media would tend to view them as two million "dupes." The conflict brewing at the tip of Africa is certain to spill over with a deadly impact someday in the United States.

— Gene H. Hogberg, News Bureau