U.S. to increase efforts to crack open Japan markets

U.S. to increase efforts to crack open Japan markets

By Keiji Urakami

TOKYO (Kyodo): Based on its latest findings on foreign trade barriers, the United States is expected to turn up the heat on Japan in a bid to pry open its markets for American goods and services.

A major weapon being considered by the U.S. is a threat of trade sanctions that could be used in case Japan fails to demonstrate concrete market-opening measures in the second round of such a package set for release in late June.

Washington is also expected to augment effects from the threat, with a maximum and effective use of a series of actions planned to be made within this month on such trade fields as supercomputers and telecommunications.

But Tokyo, wary of the tactics' nature that may lead to unilateral action on the side of the U.S., is prepared to reject a retaliatory threat, even at the expense of the much-hoped-for resumption of the Japan-U.S. trade "framework" talks.

Japanese trade ministry sources said Washington obviously wants to use a hit list in the 1994 National Trade Estimate on Foreign Trade Barriers released by the U.S. Trade Representative (USTR) Office last Thursday as a way to force Tokyo to compromise or face punishment.

The 281-page annual report found Japan guilty of unfair trade practices in 43 areas in seven industrial sectors that range from three priority issues covered under the stalled framework talks and intellectual property to farm and forestry import policies, computer trade and standard and certificates. The number of areas named is higher than the 39 in last year's report and the largest ever for the country.

Moreover, the report devoted 44 pages to Japanese issues, and the rest for 34 other countries and four trading blocs, in an apparent show of Washington's criticism of Japanese trade practices.

Summing up the report, Ira Shapiro, general counsel at the USTR Office, said, "The barriers in Japan to imports of manufactured goods and services far exceed the barriers found in other G-7 (Group of Seven) nations and place an unacceptable burden on the global trading system."

This year's USTR report takes on a significant meaning for Japan's trade ties with the U.S. in view of the recent revival of a U.S. trade provision known as Super 301, a step virtually targeting Japan for retaliation.

Under the provision, reinstated after the February breakdown of the Japan-U.S. trade talks, Washington will identify trade practices it finds unfair to American products, using findings from the latest USTR report on foreign trade barriers. The U.S. administration would then have until Sep. 30 to pinpoint priority countries engaged in unfair trading.

Super 301 priority designation triggers investigations and negotiations with the designated countries for up to one year with a view to eliminating the unfair practices. If the talks fail, the Office of the USTR has power to impose punitive tariffs.

U.S. Trade Representative Mickey Kantor has already hinted at subjecting eight trade sectors -- lumber products, sheet glass, paper products, computers, supercomputers, telecommunications, medical equipment and insurance -- to Super 301.

Hiroshi Kumagai, international trade and industry minister, voiced strong concern over the USTR report's possible use by Washington in selecting Japan's market sectors subject to Super 301.

Kumagai said, "If Super 301 is applied to Japan, the Japanese- U.S. economic framework talks will collapse. We cannot remain quiet if any move is seen to link the trade provision with sectors listed in the USTR report."

The business community also blasted the apparent U.S. intention to use threats. Takeshi Nagano, president of the Japan Federation of Employers Associations (Nikkeiren), said the U.S. stance shows Washington's "lack of understanding of Japan's willingness to be a good partner of the U.S."

Washington, rather than softening its stance, is apparently stepping up pressure on Japan by preparing a series of actions far ahead of Sep. 30, in hopes of accelerating Tokyo's efforts to show specific ways of slashing its mammoth global trade surplus in the June market-opening package.

The first round of a Japanese package, unveiled at the end of March, was rejected by the U.S. as short of adequate to restart the framework talks, being branded as "half-finished work" that does not contain two key steps -- numerical targets to gauge Japanese imports and the introduction of multiyear tax cuts as a tool to stimulate the domestic economy.

Some sectors cited in the USTR report, like computers and telecommunications, will come under the spotlight on an individual basis ahead of the September deadline.

By mid-April, Washington is expected to announce whether or not Japan is observing its pact with the U.S. over its government's supercomputer procurement, based on Section 306 procedures for trade retaliation.

If Tokyo's efforts to buy U.S.-made supercomputers are found inadequate, both parties will be given six months for negotiations to settle the issue.

U.S. judgment over Japan's trade practices is also planned on other government procurement areas, such as telecommunications, medical equipment and computers, by the end of April, in line with the Japan-U.S. procurement arrangement of May 1988.

Moreover, the U.S. is considering applying Special 301 procedures to patents, copyrights and other so-called intellectual property rights in Japan on charges of piracy, also by the end of this month. Special 301 is an intellectual property version of Super 301.

Chief Cabinet Secretary Masayoshi Takemura warned against excessive reaction by Japan to the latest U.S. move, saying, "We do not have to swing from joy to sorrow on each item listed as a trade barrier."

"All Japan can do is devote itself to giving shape to the March market-opening package toward the end of June," Takemura said.

MITI chief Kumagai sounds a little tougher on the U.S. "Some people on the U.S. side say Japan will accept the U.S. demand if threatened, but focusing only on winning a game in a war of words will not contribute to improving relations in the long-term."