Should We Be Concerned About Our Trade Balance with Japan?

With the US trade deficit with Japan approaching nearly $50 billion annually, observers are concerned not only with the extent of the deficit, but also with its composition and long-term implications. Suggestions that the Japanese advantage arises from cultural differences fail to take into account...

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Bibliographic Details
Published in:Business forum (Los Angeles, Calif.) Calif.), 1986-10, Vol.11 (4), p.18-21
Main Author: Majumdar, Badiul A
Format: Article
Language:English
Subjects:
Balance of trade
Commerce
Competition, Unfair
GNP
Gross National Product
International trade
Japan
R&D
Research & development
Research & development expenditures
Research and development
Trade deficit
Trade relations
Trade surplus
United States
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Summary:With the US trade deficit with Japan approaching nearly $50 billion annually, observers are concerned not only with the extent of the deficit, but also with its composition and long-term implications. Suggestions that the Japanese advantage arises from cultural differences fail to take into account economic and technological factors. Worth noting is that the trade deficit with Japan in products that require intensive research and development (R&D) -- where the US traditionally has enjoyed a comparative advantage -- grew over 27 times between 1966 and 1980. From 1961 to 1981, the ratio of R&D expenditures to gross national product in Japan rose from 1.39 to 2.41 while falling from 2.73 to 2.43 in the US. While the majority of US R&D funds come from the government, in Japan, 60% of R&D funding comes from the private sector whose main interest is the development of commercially viable products. The ability to utilize R&D funds in a productive manner has been further boosted in Japan by increasing personnel involved in R&D and an increasing percent of the college age population given engineering training -- 4.2%, as opposed to 1.6% in the US.
ISSN:0733-2408