reconcile their production and planning to help meet that kind of problem and still leave a lot of free, open play in the marketplace for competition.

I look more and more toward depoliticizing trade. You might react to this from your own point of view. I sometimes think what we ought to do with the ITC is elevate it to an entirely quasijudicial body that would make decisions that would be absolutely binding without veto by anyone else but the Congress. I think we could shortcut the process. I want to remove diplomacy from these decisions. I don't know how many trade decisions are based on what kind of accommodation the country might make with respect to the Olympic games or problems of Iran or other problems that are in the world of diplomacy.

Businessmen of Japan and Europe and our own country feel that the ITC is our own court in arriving at decisions in a judicial procedure with precedents, with patterns, so that there are no surprises, so that everyone can understand and assume that if certain conditions develop, certain reactions are going to occur. I think it would remove a tremendous amount of uncertainty in our processes and I think it would give all people involved in the trading business a feeling that in America at least you know the criteria that is going to result in a certain kind of action.

I think today the wisdom that is being exercised on trade policy must come from Japan because we are not ready to come down on decisions that are uniform. We have to depend on pretty much the wisdom and the judgment of those who utilize our markets and enjoy participation in them.

I have urged our trading partners to make declaration right now so that they can help remove the trade imbalance that we face from the political zone so that we have a more rational basis of understanding.

I am very concerned about the growing involvement of Congress in this business, and that I felt almost certain that the new Congress, of which I will not be a Member-I know I am not going to be a Member by choice, others have yet to discover that, so we don't know what changes will take place-but I will say for all certainty Congress will be dealing much more harshly, much less temperately, and probably more likely more passionately with these trade problems.

I know there is some report today about some voluntary restraint efforts in autos. I am hopeful that it has real meaning because a cutback of 220,000 automobiles in our market would be a constructive thing to help our own industry catch its breath.

I would rather these decisions be made by voluntary action by the parties involved and capable of making the decisions than let the decision be made by Congress. Although I think we have expertise, we have the capacity of developing a result which will be absolutely displeasing to everybody.

Mr. Frenzel.

Mr. FRENZEL. Thank you, Mr. Chairman.

I want to thank both of the gentlemen for their fine testimony. I did not hear all of it, but I have had a chance to read it. I especially thank Dr. Destler for his complimentary remarks about this subcommittee and the task force.

I did want to comment on Ambassador Ingersoll's statement, in two respects, and then ask him to comment.

The first comment relates to your trade group, on page 4. As you know, this task force has been very interested in the trade study group and consider it extremely important because it has gotten the job done at the working level.

I think, however, the quotation describes the brighter side of the picture because you have the ins talking about the outs in Japan, and they have high profit operations, and there is hardly a welcome mat for folks on the outside. While I agree with the statement, I think it has to be looked at in its total context.

The second thought I have relates to your comment on the bottom of page 9, that we cannot look at bilateral relationships in as sharp focus as has been our wont, that we should rather look at the overall trade relationships and balances. That is good macroeconomic theology, and I think we all agree with you, but as you, yourself, pointed out, it does not work completely.

You also warn us that our trading partners also use the bilateral relationship argument against us. I would like to put you on notice that they are doing this on an hourly basis. This is not some new development.

For instance, they are creators of a common agricultural policy, an obnoxious protectionist agricultural policy as the mind of man has ever devised. Nevertheless, they are coming to us and asking for relief. I think in a real world we can tip our caps and wish that someday we can have the macroeconomic policy, the luxury of thinking in terms of overall trade.

In the real world, just as the French come to us and say, "You cannot persist in multibillion-dollar surpluses to our country," so we have to go to the Japanese and say, "Look, our problems as they occur are exacerbated by the fact that we have this perpetual-at least it looks like it is going to be perpetual-we have this perpetual imbalance between our country, and that is not the way decent trading partners deal with one another."

We can stand an imbalance for a period of time. We cannot stand an ongoing trade imbalance. It is not sufficient for Japan to come to us and say, "We have to buy oil," more expensively, while at the same time we are not doing a good job of developing our own market. We have tried to make this point in Japan as nicely as we could.

Admittedly, making points nicely over there does not work with them. So my comment to you is that we would rely on your joint agency to help us make this point. It is very hard for us to defend a good world trading system with a partner that apparently, to our average constituent, looks like it is taking us for a ride.

That is a very long comment. I hope your response is much shorter. Thank you.

Mr. INGERSOLL. One of the major chapters in our report will be on the openness of the Japanese market. I am referring to the general nature of the Japanese market. Essentially, they have dropped more formal restrictions. There are a few on agriculture. We are concerned about the homogenous nature of the Japanese society and the effect that has upon foreigners importing into their country. Japanese members of our group fully recognize that and

are joining us in making recommendations that over a period of time the Japanese market, in their own best interest, will be open.

I have not spelled out what those recommendations are because we haven't made the final decision with our group.

There is a recognition by the Japanese members that it is essential that Japan must become more internationalized. If they are going to enjoy the benefits of exports to other nations, they must increase the imports of manufactured goods to their own.

Mr. FRENZEL. I appreciate that. That is the message that we have tried to convey.

Finally, I would say, Mr. Ambassador, we are depending on you and your group to be very helpful in our overall relationship. The Japan-United States Economic Relations Group, which is a large mouthful but better than "The Wise Men," is going to play an increasingly important role. We want to work with you and we appreciate your help.

Dr. Destler, we appreciate your help as well.

Thank you, Mr. Chairman. I yield the balance of my time.
Mr. VANIK. Mr. Jones?

Mr. JONES. Thank you, Mr. Chairman.

I also want to thank and congratulate our two witnesses.

As we said in the report on your group, Ambassador Ingersoll, one of the major shortcomings is the fact that it does not have the public exposure and publicity in this country that the group has in Japan. I think it also tells us some of our own faults about dealing with the bilateral trade issue.

Japan is taking it very seriously and it is front-page news. We may get it on page 43 in the newspapers in the United States. Mr. INGERSOLL. If we get it.

Mr. JONES. If at all; you are right. I hope we can work with you and your group to get the highest amount of visibility both in Government circles and in the public at large of the work that you are doing, because I think your work, along with that of several others, but particularly your work, is the very key to the kind of bilateral, long-range relationship in trade that we want with Japan.

Let me ask about some specific sector areas, first with regard to automobiles. Of course, that is a very volatile political issue in certain parts of our country. Recent news stories have reports that the labor organization in Japan is urging some restriction, and then today that there will be a concrete restriction on automobiles. What do you make of that? Is this a fundamental change in policy? Does this mean we will not be hearing from Japan the argument that antitrust laws prevent them from restricting exports to the United States, or other reasons? What is your prediction on the recent spate of news stories?

Mr. INGERSOLL. I don't think you will hear the reasons, specifically, from Japan, because of their concern as to what our laws may imply to them. I think they have received the message that you and your colleagues have been giving them, as well as those that we in our group have been giving them, and many others that the political consequences of our recession and the trend toward energy-efficient cars is severely hurting the American economy and

generating the political heat that many of you are receiving from your constituents.

They, I think, are also receiving this kind of heat from their own government. I hope that they are responding to all of the messages. Another phase of this, of course, is the encouragement that they invest in facilities for production in this country. You mentioned their trade union leader suggesting they have restraints. He also suggested that they invest in this country, which is not the kind of statement I think you would find from an American labor leader, but I think it is very worthy of the situation. They fully recognize it and I think they are trying to respond to it.

Mr. JONES. One of the reasons we were not specific in recommending what kind of relief or what kind of action we wanted is that I think we felt that we did not want to be in the big brother posture of dictating to them what they had to do. We wanted to explain the problem to them and let them find a uniquely Japanese way to solve it. Dr. Destler indicates that as a criticism of our approach.

Do you want to expand on that, in light of the reasons for taking the position?

Mr. DESTLER. What you are saying is that you felt that since this was an action that the Japanese had to take, it would perhaps be inappropriate or insensitive to tell them exactly what to do.

I was not arguing that in your public report you should have drawn a line and said the American market could only take a specific number of cars, that the Japanese should limit sales to the U.S. market to that specific number. I was talking about overall U.S. official communication with the Japanese on automobiles; our inability, for lots of good understandable legal and political reasons to be specific about what our system would settle for, and to communicate this, perhaps quietly, perhaps through the executive branch.

The fact that we could not give them something specific, increases their uncertainty about what would be good, sensible, appropriate Japanese action. Our lack of specificity, for example, encourages arguments among Japanese manufacturers as to what level of restraints would, in fact, serve to cap the political crisis in the United States. Somebody would argue: Why should we restrain a little bit if we don't know what the political effect will be in the United States. But I understand the dilemma you are in.

Mr. JONES. One specific item we recommended had to do with the investment in production and replacement parts in this country to service the $5 to $8 billion replacement parts market on Japanese cars that will be created 5 years down the road. To this point we have not seen any positive, concrete response to that recommendation. I think that is a very important one that I hope they have not misjudged or overlooked.

Mr. DESTLER. That seems to me a very constructive one, it is something that could be established now and would grow. It would be a growing market which could be produced for in this country. Mr. JONES. Would you care to comment on that, Ambassador? Mr. INGERSOLL. I would like to add that I think they ought to be permitting American manufacturers who are already in the parts business to sell those parts to them, too. They complain that

American manufacturers cannot meet their quality standards, but they work with them, just as they might with Japanese suppliers, to come up with the standard they want.

Mr. JONES. This quality issue, to some extent, is a valid one, but I think it is a smokescreen many times. It is a smokescreen with regard to the telecommunications business, for example. This NTT issue is one that can be very volatile before the end of this year. I think our Government position and the position of this Congress is that if an NTT agreement is not reached before the end of this year, which is the timetable set, then the retaliation with regard to Government procurement for the rest of Japanese products, the denial of access to the government procurement in this country, will go into effect. I hope that message is understood very plainly, because Congress is not going to come in and save the situation or buy more time.

I would like to ask either of you if you have any comment on the NTT negotiations at this point, what we might do to further those? Mr. DESTLER. My only brief comment would be that I think this is a sensible position for the United States to take. I think more and more, and to the degree possible in our negotiations with the Japanese, we ought to get away from generating the impression, that if a particular issue is not solved the Japanese islands will sink or the alliance will be destroyed. But we should make it clear that there will be a concrete quid pro quo.

It seems to me that there is available here a logical tradeoff between their access to our procurement and our access to theirs. It is a very sensible basis for bargaining on this issue.

Mr. INGERSOLL. Mr. Jones, I think the Japanese have fully received the message, from the conversations I have had with them. They have their internal problems of resolving it. I have a feeling that it is on the way to resolution and, perhaps, what you might say, in a Japanese way. It might not be what we expect, but I think that the trend is now that they are going to meet essentially our requirements, so that we will feel that we can open up our Government procurement market to theirs as they will to ours.

Mr. JONES. I hope so. They have been making promises on autophones, mobile phones, things of that nature, but we have had very little performance yet. We would like to see some performance.

My time has expired, but let me ask this question: We have cited in our report some problems in the future, such as robot machine tools, aircraft, et cetera. What do you perceive to be the sectoral problems we are going to have with Japan in the next 5 years, and how can we work to avoid those problems?

Mr. INGERSOLL. I think probably the most important sectoral area that we have studied and we believe will be the important ones in the future is the high technology area of semiconductors, computers, telecommunications.

We believe that it goes back to our overall recommendation that it is important that the American economy be straightened out, reduction in inflation, increased incentives for investment, so that there is an opportunity for return, because this business is becoming highly capital intensive.

When large sums of money are bet on a risk, there must be a pretty good return anticipated.