Summary: GAO discussed the economic relationship between the United States and Japan, focusing on trade disputes between them. GAO noted that: (1) the most visible point of contention of the U.S.-Japan trade conflict is the bilateral trade deficit caused by the two countries' differing economic policies; and (2) Japanese trade barriers affect the ability of individual U.S. industries to operate effectively in Japan, since such barriers interfere with trade flow. GAO also noted that there are features of the Japanese marketplace that are not true trade barriers but are difficult and expensive for U.S. firms to overcome, including the: (1) complexity of the product distribution system; (2) longevity and complexity of buyer-seller relationships; (3) complexity of the language; and (4) resistance of consumers to imports. GAO believes that: (1) both nations have an obligation to resolve the trade conflict; (2) the United States must reduce its federal budget deficit; (3) Japan has not set the yen-dollar exchange rate so that its businesses have an artificial trade advantage; (4) Japan should recognize that, since its role in the world economy has changed, it would be best served by a more open world trading system; and (5) the United States should continue to negotiate the removal of trade barriers. GAO concluded that the United States and Japan must find a way to address and resolve their problems.
