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U.S. Pressure Brings Some Progress, Some Resistance on Trade

March 22, 1990

TOKYO (AP) _ A concerted campaign to make it easier to sell American products in Japan appears to be yielding some results, but also is triggering debate over how far Tokyo should go to meet U.S. demands.

Negotiators on both sides are racing to meet a mid-April deadline for a report on progress toward reforming business practices and laws that hinder efforts to reduce Japan’s $49 billion trade surplus with the United States.

Washington has been demanding urgent action on key trade issues. It contends that Japan’s business world is too closed, that land policies sharply boost the cost of doing business in Japan and that this country should increase public investment to help reduce dependence on exports for economic growth.

In a March 2-3 summit with President Bush and in talks with Commerce Secretary Robert Mosbacher in Tokyo last week, Prime Minister Toshiki Kaifu pledged to carry out some of the reforms sought in the negotiations.

At Kaifu’s behest, trade officials are drafting an interim report on steps to narrow the trade gap and the reforms. The report is to be released in mid- April and Japanese reports say Japanese and U.S. officials are working on it this week in Warrenton, Va. A final report on the talks is due in July.

Japanese press reports on the draft report, which has not been made public, indicate Kaifu is making limited progress on the types of major changes demanded by the United States.

- Fair Trade Commission officials said Tuesday they were considering raising penalties for violations of Japan’s anti-monopoly law. U.S. officials say lax enforcement of the law enables Japanese companies to form cartels and exclude foreign firms from their markets in a number of areas, including construction and electronics.

- Local media say the interim report also includes plans to ease enforcement of a Japanese law that protects small neighborhood shops from large retail competition.

U.S. negotiators contend that by forcing supermarkets and department stores to wait up to 10 years to open new outlets, the law prevents foreign-owned stores like Toys ‘R’ Us from setting up shop in Japan. Larger Japanese stores are more likely than small shops to sell foreign-made goods, they say.

- Mosbacher, sent to Tokyo by Bush to follow up on trade demands, returned to Washington with at least one souvenir: pledges from two Japanese car makers to buy more American-made semiconductors, and promising responses from other major corporations.

- The economic newspaper Nihon Keizai Shimbun says the draft report includes plans to step up spending on roads, sewers and parks; ease restrictions on corporate takeover bids, and impose higher taxes on some farmland in an attempt make more available for commercial and residential use, thus pushing down sky-high land prices.

Despite these signs of progress, Japanese negotiators are shying away from U.S. requests for measures requiring legislative approval.

Japanese officials have refused to comment on the media reports.

Japan’s business community has strongly opposed U.S. calls to revise the anti-monopoly law, saying it only needs more rigorous enforcement. There also is strong opposition to abolishing the retail stores law, which business leaders and officials say would cause an economic slump.

They express concern that the far-reaching reforms demanded by Washington would sacrifice traditional sectors of the economy, like small shops, and perhaps even the nation’s robust economic growth for the sake of uncertain improvement in trade figures.

And despite calls for fully opening its agricultural markets to reduce high food prices, Japan has remained adamant against lifting a ban on rice imports. It says it wants to protect its self-sufficiency in a staple food and preserve rural traditions.

While many analysts say U.S. pressure is needed to bring consumer-oriented reforms in Japan, they say the onus for change should be placed on Washington.

″America believes Japan needs to make big changes. Most Japanese don’t. We have made big changes already. It’s necessary for the United States to change,″ former trade ministry official Makoto Kuroda told the Nihon Keizai Shimbun newspaper in a recent interview, echoing the sentiments of many past and present trade officials.

The officials also question whether the United States will follow through on pledged reforms aimed at boosting export competitiveness and reducing the high consumption fueling demand for imports.

″We are under pressure to show results, but we will only promise what we can actually carry out,″ said one Japanese official, who spoke on condition of anonymity. ″The U.S. side will promise all sorts of things, but there’s no guarantee they can follow through.″

Recent trade figures indicate the two countries are slowly whittling away at their enormous trade imbalance, which accounts for 45 percent of the total $105.9 billion U.S. trade deficit.

The trade imbalance, which peaked at $57.9 billion in 1987, was $49 billion last year. In January, it dropped to its lowest montly level in five years - $2.9 billion.

″We are on the right track. The question is whether it will move fast enough to meet political demands,″ the official said.

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