First Japan
and more recently China
have pursued export-oriented growth strategies.
While other Asian countries have done likewise, the cases of Japan and China
are of particular interest because their economies are so large and the size of
the associated bilateral trade imbalances with the United States so conspicuous. In this paper we focus on the significant
spillovers to the international trading system from U.S. efforts to restore the
reciprocal GATT/WTO market-access bargain in the face of such large
imbalances. The paper highlights
similarities and differences in the two cases, including the role of explicit
and implicit subsidies, foreign direct investment, technology transfer, and
currency misalignment. We explore U.S. attempts to reduce the bilateral
imbalances through targeted trade policies intended to slow growth of U.S.
imports from these countries or increase growth of U.S. exports to them. We
then examine how these trade policy responses, as well as U.S. efforts to
address what were perceived as underlying causes of the imbalances, influenced
the evolution of the international trading system. Finally, we compare the
macroeconomic conditions associated with the bilateral trade imbalances and
their implications for the conclusions of the two episodes.