U.S.-Japan partial accord

The last-minute partial trade accord reached by the United States and Japan over the weekend, though leaving several major issues unresolved, should still be hailed as a breakthrough because the outcome averted the worst-case scenario of immediate sanctions against Japanese suppliers.

Encouraging, too, was the fact that the partial agreement, the first major deal between the two countries after more than 15 months of sporadic negotiations, was concluded without special reference to numerical targets, so far the most difficult sticking points in the trade talks.

The deal that opens up the Japanese markets in four sectors -- telecommunications, medical equipment, glass products and insurance -- allowed the two countries to save face and to avoid negative reactions on the markets which would have adversely affected other countries.

Last February, when the two economic powerhouses failed to reach any agreement on their trade disputes, the financial markets were jolted, the Japanese yen was bolstered, the American dollar nose dived and the U.S. interest rates increased sharply. Such developments obviously did not benefit any country.

We hope the partial accord will give both countries a higher sense of confidence about settling other major issues, such as automobile sales and car parts, which are responsible for the bulk of the United States' $60 billion trade deficit with Japan.

U.S. Trade Representative Mickey Kantor said the U.S. would start a probe of Japan's replacement car parts market that could lead to limited trade sanctions. The U.S. apparently was not satisfied with the pledge by major Japanese car makers last March to import more auto parts from American suppliers.

We understand that it is not desirable nor favorable for Japan to negotiate against a background of sanction pressures. Yet, the fact that Kantor would use Section 301 of the 1974 Trade Law rather than the more aggressive, punitive Super 301 trade tool shows that both sides are likely to be willing to sit down for another bout of vigorous negotiations.

The partial agreement is a good foundation for further negotiations between the two countries. The U.S. is especially expected to remain sensible and to refrain from the irrational measure of imposing sanctions because this might nullify the achievements made so far.

Any explosive dispute between the two giant economies will have damaging repercussions on the global economy, jolting the financial markets and upsetting foreign exchange stability.

Indonesia naturally felt relieved with the partial accord. Since more than 40 percent of its foreign debts of about US$100 billion are valued in yen and its oil and natural gas, which generate around 30 percent of its foreign exchange revenues, are priced in the American dollar, Indonesia would be one of the hardest hit by any exchange rate volatility set off by the trade dispute.