Eage 4-Saturday, November 12, 1977-The Michigan Daily Eighty-Eight Years of Editorial Freedom 420 Maynard St., Ann Arbor, MI 48109 Vol:LXXXVIII, No57 News Phone: 764-0552, Edited and managed by students at the University of Michigan 11 Japan 's exports threaten ties By DAN OBERDORFER - When Japan's ambassador to the U.S., Fumihiko Togo, ad- dressed several audiences on campus last week, his message was clear; escalating economic tension in U.S.-Japanese rela- tions is becoming a problem the Japanese wish would go away. The Japanese are not alone in their displeasure over the current status of trade relations between our two countries. American tele- vision, steel, motorcycle, micro- wave oven, and CB radio manu- THE PAST several years have seen the American balance of payments worsen. It is estimated that this year's debt will reach the $30 billion mark. To the American business com- munity, a trade deficit means American consumers are spen- ding their incomes on foreign goods, in this case Japanese. The leakage of funds from the domes- tic economy cuts into the profits of companies which compete with the importers. As their products are bought less, production is curtailed. Domestic unemploy- Merrill Lynch is tou bullish M ERRILL LYNCH, the nation's largest stock broker, was ac- fused by the Securities and Exchange 4,ommission (SEC) Thursday of fraud- itlently pushing stock on its clients without adequately investigating the stock's potential. Ironically - or maybe not so ironi- ally - Merrill Lynch is the same firm yho encouraged Ann Arbor City Ac- 4ountant Marc Levin to enter into spec- ulative investments of taxpayer's mon- ey. To make a long story short, the city jpst barely avoided losing $1.4 million; Levin has been fired; and Merrill Lyn- ch, supposedly in a show of good faith, fired the broker with whom Levin dealt. We see now that Ann Arbor is not the only one to have been victimized by the Merrill Lynch Corporation. While the city certainly was not faultless in the whole affair, revela- tions about questionable business prac- tjces do give one pause in assessing 1lame. Clearly, one cannot say that be- cause a firm is accused of doing some- thing ten years ago they automatically Fightingto a HE TRAGIC series of events along , the border between Israel and Leb- anon only serve to remind us that the troubles between those two nations will liot solve themselves - nor will they - isappear if we turn our heads. Over a period of three days, three sraeli civilians and at least 100 Leban- *se civilians fell victims to attack and *etaliation maneuvers. No matter vhich side this country supports - or iny other country supports - one can aot condone the activities of either the alestinian guerrillas or Israel. eath _innocent' citizens are not ustified by any political school of hought. Murder is murder. For the entire length of time Israel has been a legitimate state, murder has only begotten murder; attack has nly drawn retaliation. The pattern appears ,by now to almost be under- stood by all sides as a natural law. erhaps this is the only law which has orked to decrease the incidence of iolence in the Middle East. 1 It may be a fact that one side will esitate before launching an attack on he other, for fear that the extent of the ther's retaliation will be too great a rice to pay. Inevitably, however, the apse between violent outbursts is ade up for in the size and severity of ater attacks and counter-attacks. a As long as the grotesque exchange bf slaughter continues, one side will always have some vengeance for nother. are guilty in another scandal in another state ten years later. However, investments are very complicated maneuvers. That is why we have investment firms. When one goes to a firm such as Merrill Lynch - regardless of whether they represent themself with $1,000, or a city with mil- lions in taxpayer's money - one should have a right to expect to be dealt with honestly and in the best of. faith. Merrill Lynch now has dark shadows being cast on its reputation for ethical dealings. Moral ethics are something that have been lacking in much of "big business" for sometime now. For the most part, however, businesses are dealing with money which they have themselves earned. An investment firm deals with other people's money, and therefore higher ethical standards are expected from them. Merrill Lyn- ch is not meeting those standards, if the SEC charges are any indication. Merrill Lynch is bullish, alright - but on themselves, more than anything else. Geneva peace The only thing one seems able to do from overseas is urge that the Israelis and the Arabs recapture their senses and prevent a new cycle of bloodbaths from occurring. Aside from the innocent lives which would be lost, a new flare-up between the two sides might threaten the delicate advances which have been made toward convening a Geneva peace conference. Egyptian President Anwar Sadat said only this week that he would go directly to the Israeli parliament, if necessary, to get a new peace conference underway. Sadat at the same time urged leaders of other Arab countries to set aside "procedural" difficulties associated with the Geneva meeting and work toward getting the sides together at a common table. Israeli Prime Minister Menahem Begin yesterday added that Israelis are willing to seek not only peaceful, but cooperative relations with Egypt in the future. It is true that these are only the words of politicians, nevertheless, they are good words. A new conflict in the Middle East at this time would set those words back ten years. The events of this week prove that just waiting for peace is unrealistic; Israelis and Arabs cannot resolve their differences on their own. Geneva is the only plausible way toward a per- manent peace. If this week's senseless loss of lives prompts Middle East coun- tries to convene in Geneva any sooner, then the victims did not die in vain. 1 i less 'If world economic problems per- sist, the world is going to look for a scapegoat and Japan is a likely tar- get.' - U. S. Deputy Secretary, of State Bob Oakley tured goods by the Japanese would swing her imports toward a level more consistent with the rest of the world. "Japan is a big market for things, but the toughest thing for them to do is to open their mar- kets to imports," Oakley said. From the Japanese standpoint, opening her markets to unempe- ded trade may harm many of her weaker industries. Meat prices, for example, are kept at an arti- ficially high level so Japanese cattle raisers can remain in busi- ness. Land is so scarce in Japan that open competition in the meat market would bring about the de- mise of disadvantaged Japanese cattlers. ANOTHER METHOD for stimulating imports is to stimulate the economy. In theory, as the economy is stimu- lated and consumers make more purchases, many of *the extra purchases will be for imported goods. This is the road the Japa- nese government chose earlier this fall. Instead of cutting into trade surpluses as the government ex- pected, the policy may have con- tributed to skyrocketing surplus- es. It is estimated that their trade surplus of $16 billion will grow four or five times this year. Oakley feels that "if the world economic problems persist, the world is going to look for a scape- But, the Japanese have been wrongfully blamed for being a source of our steel industries woes. Recently, the Japanese gov- ernment has compared the 1930s to the current threats of import restrictions being laid to her products. During the 30s, western nations closed their markets to Japanese textiles, sometimes with rapist intent. These restric- tions- helped precipitate the Pa- cific War. It is interesting to note that the Japanese see the current situation through some of the same light. JAPAN IS dependent on the U.S. for a number of things. Not only is trade between us a boon to her economy, but she must count on us to preserve the precarious power balances in Asia. If politi- cal shifts in Asia were to prohibit free trade, Japan's economy might falter. Although essential elements exist for creating a fieldable mili- tary of her own, Japan has none at the presentsbecause of post- war agreements. American troop withdrawals from Vietnam, and lately from Korea, have added to Japan's uncertainty about America's commitment to her. While Japan continues to be de- pendent on the U.S. both militari- ly and economically, she must realize how firmly our govern- ment is committed to propping up facturers recently charged the Japanese with selling their coun- terpart products under cost, or "dumping." THE DEPARTMENT of State, also, is showing signs of greater concern for the issue. Very inten- sive discussions are being con- ducted by U.S. and Japanese of- ficials over the problem of growing payments imbalances between our two nations, accor- ding to remarks made earlier in the week by Deputy Secretary of State for East Asian Affairs Bob Oakley. In a nutshell, the problem is this. The American side is hard- ening its opposition against sub- sidizing Japanese trade surplus- es as long as American continues to incur large deficits. The Japa- nese side is worried the Ameri- cans, might stand up to their word. Since their surrender at the end of W.W. II, Japan has looked to- ward the U.S. as a market that can be utilized whenever neces- sary. Trade volumes have skyrocketed over the years. Last year, Japanese exports worth roughly $15.7 billion reached the U.S., nearly one-fourth of their total exports. TRADE BETWEEN us is more volumnous than that between any two other nations in the world. "The United States has long been Japan's best .customer in the world," Togo said in one of his speeches here Nov. 4. Ill feelings have developed because the two nation's trade positions are not reciprocal. Japan is far from America's best customer. The U.S. acts as a developing nation in her trade dealings with respect to Japan. Our exports to her are made up of mostly raw materials and agricultural prod- ucts, not the finished, manufac- tured goods that characterize trade between developed nations. We export soy beans and logs, not soy bean oil and lumber. It is our manufacturing indus- tries which compete with the Japanese products for the Ameri- can consumer's dollar, and it is these industries which are feeling the crunch. These manufacturers have taken the lead in fighting against so-called Japan Inc. ment results. For example, Japanese exports of TV sets jumped from $1.1 million to $2.9 million last year. As a result, eight out of ten Amer- ican television manufacturers op- erated in the red and workers were laid off. LATER IN THE year, volun- tary quotas for TV sets were agreed upon by U.S. and Japanese negotiators. The Japanese were not happy with the agreement but aquiesced to preserve profitable trade rela- tions in other spheres. "There was nothing sinister about that import surge," Togo told a standing-room-only crowd at Lane Hall. "It was fair compe- tition and American consumers clearly benefited." And he hid a good point. Japa- nese products persistently under- sell American products. BUT, IF THE Japanese are angry over American threats of trade restrictions, they must only look at their own policies to see an exact parallel. A Ford Pinto, which sells in America for rough- ly $3,300 will sell in Japan for several times that price. "The Japanese feel penalized for success," said Deputy Secre- tary of State Oakley. "But it's partly that their restrictions have helped create this imbal- ance. The problem for ,Japan could become serious, and. that's. what we are trying to head off with the negotiations," he said. Any international economics textbook will tell you that the Japanese balance of payments surpluses can be corrected through either of two routes - in- creasing the flow of funds leaving the country or decreasing that coming in. If the Japanese are unwilling to reduce exports, as all indications point to, trade restric- tions must be removed to allow for substantial increases in im- ports. AS IT IS now, 80 per cent of Japan's imports are of raw mate- rials and agricultural products. In contrast, the United States and Great Britain's imports are com- posed on only about 50 per cent unfinished products. An easing of trade restrictions on manufac- RHM5°MBR bRL. - 4MA~SOr " ' ... 0 "M1 .. .. O y :. ' \ , o ' " , \ ' 1. f ,. M ~ ' Q . *,is , . . . . . , .. t " ., O " ? goat and Japan is a likely tar- get." THIS MAY have already be- gun. The current crisis over U.S. imports of steel has been linked to trade with Japan. American steel producers have floundered as demand for their product drops and they become less and less competitive. Steel imports have doubled in the past year, although Japanese steel imports are at virtually the, same level they were a year ago. European increases in imports were responsible for the change.. our own faltering industries - not hers. Deputy Secretary of State Oak- ley fears that U.S. restrictions on the importation of some products from Japan "could come up soon." . Japan should voluntarily reduce her trade surpluses before other countries enforce trade restrictions upon her goods with, out her approval. Dan Oberdorfer is a staff writer who spent years in Japan. Daily three Letters to a c PTHE MILWAUKEE JOURNAL c r R F r i! ii, '"' "i _ 1 := ' ' ' The 1 A I a NI"Itifif / d A ~ ~ cvj ' J/ ww' propaganda To The Daily: The interesting letter signed "Clericals for a Democratic Union" (Nov. 2) covers many points. I wish to discuss only one: the allegation that Amer- ican faculties conduct capital- istic propaganda. Now, if there is anything I know well it is genus Professor Americanus. Not only was I one of that bunch for many years, but I have known- hundreds' personally, in some fourteen institutions, and known of. many others by their works. And I would say that the chief thing they have in common is that they have very little in common. Some are Republicans, some Democrats, some Socialists. Some read the New York Times, some the New Republic, some nothing but the Proceed- ings of the Pneumoneurogas- tronomical Association. Some Jews, somecatholics, some Protestants, some agnostics. of the party line of the moment get into trouble. But in this country there are many ortho- doxies. Does American history (Civil War Period) mean the same thing in Mississippi and Massachusetts? Is orthodox biology in Dayton, Tennessee, orthodox biology in Columbia? Take the case of Professor Sumner of Yale. I have never known of a more capitalistic economist than he; he pushed laissez-faire to the extreme point of Herbert Spencer. Yet he was in continual hot water, because his orthodox capital- ism of that time (the McKinley period) was protectionist. I think things are abit more complex and diversified than is generally assumed. - Preston Slosson [professor emeritus] marching band To The Daily: This letter concerns a cam- pus organization which is over people is the University of Michigan Marching Band. Do you have any idea what those people have to go through to make a successful half-time show? Do you people realize what type of effort they put into those twenty minute shows which are recognized by other bands as some of the best examples of Marching and Musical performance in the entire U.S.? Do you have any idea of what those people do before each game in terms of getting the fans up for it? The band is Super-Great! Let us sing the praises of those fine up-upstanding people under the direction of the finest conduct- or in the state! Hurrah for the band and all the wonderful things they do! -Joseph Gembala idealism To The Daily: In Julie Rovner's editorial Sunay heepressed her dis- )ailyI are eliminated someone will real- ize why they were necessary in the first place; the minority group students weren't properly prepared for college by the public schools in this country. Quotas were set up to correct wrongs commited in the past; but the quotas have been in effect for years now, why are students still being sent off to college with an inadequate education? Is the proper solution to simply let un- dereducated people into a school to fill a quota? Is that giving everybody an equal chance? I can't believe it's proper to try and correct an example of insti- tutional racism with another layer of institutional racism. Millions of "liberal" voices are shouting against Bakke, but how many people are working to elim- inate the need for quotas? The school system in Detroit is a fine example (and lets not be coy, there are a lot ofj minority studen- ts in Detroit). There's a millage in front of the voters right now; the only way the school board can hope to get it through is to threat- 1-00 IKI _-:s,,_ I'- A I N. I , N I~w H~..