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Japanese upset over U.S. accusations concerning semiconductors

March 11, 1989

Undated (AP) _ By Sumie Kawakami and Paul Tosto

Knight-Ridder Financial News

TOKYO - Japanese trade officials and executives in the country’s semiconductor industry are becoming alarmed and angry over new U.S. accusations that Japan has not opened its domestic market fast enough to U.S. semiconductors.

Stung by the new words and threats of possible retaliation from the United States, officials in Japan’s semiconductor industry and at the Ministry of International Trade and Industry are concerned about a new protectionist tide in the United States over the semiconductor pact.

″It is completely against the U.S. policy of free trade. How can a country with common sense say such things,″ said an industry source. ″If the U.S. forces us to do so, we will buy U.S. products but throw them into a ditch afterwards,″ he said.

Miti and industry officials are hoping to avoid provisions in the new U.S. trade law that will target a host of nations with unfair trade practices for intensive negotiations and potential U.S. retaliation. U.S. officials are now compiling the list, due by the end of April. U.S. Trade Representative Carla Hills has said the list would focus on barriers in markets with the ″greatest export potential″ for U.S. goods.

Hills is under political pressure to target many Japanese markets, including semiconductors, for priority action under the law. For many in Congress, that pact - and the perception that Japan is welshing on its commitment - exemplifies the rift in Japan-U.S. trade relations.

Although she has not said which nations or practices will be targeted, Hills has testified to an ″accumulation of frustration″ with Japan. She also has little doubt where Congress stands. ″Leaving Japan off the list to me is totally contradictory to the law,″ Sen. John Danforth, R-Mo., told Hills in a recent Senate hearing. ″I would really be startled and very disturbed if Japan were not on the list for any reason.″

Japanese officials cite a litany of reasons why the United States is not penetrating their market. The foreign share of the market was limited to 10.5 percent in the last quarter of 1988 because the U.S. industry was uncompetitive, an official of the Electronic Industry Association of Japan said. He said the 1988 fourth-quarter figure was an increase from 8.5 percent in 1986 and was mostly due to the efforts of big U.S. semiconductor companies, adding that other small companies have not made enough of an effort to export.

In addition, U.S. products are not matched to Japanese demand, the official said. About 40 percent of Japan’s needs are for consumer products - such as audio and video recorders - but the U.S. companies tend to export fewer of those types of semiconductors, he said.

″If the United States wants to increase its share in Japan, it has to think about what kinds of products or services Japan wants,″ he said.

An official at a large electronics company said the quality and service of U.S. products was lower than those domestically produced and if prices were the same, his company would choose Japanese products.

According to the EIAJ, Japan will continue its efforts to increase the share of foreign semiconductors in accordance with the 1986 U.S.-Japan semiconductor agreement, under which Japan pledged to increase its market access for foreign semiconductors by 1991.

But there is some dispute over the agreement itself. U.S. officials say Japan agreed to raise the U.S. share of their market to 20 percent by 1991, but Miti officials deny any figure was named and the language of the pact does not promise the United States a specific market share.

″To make such agreement is against Japanese law ... Japan has not or will not make such a promise,″ a ministry official said.

He said Japan pledged in 1986 to make efforts in this area by 1991 and ″it is not fair for the United States to bring up this subject before that.″

Another official at semiconductor maker said: ″Isn’t it enough for the United States, having set price-controls over Japan’s products exported to the U.S. market?″

In April 1987, U.S. officials accused Japan of not living up to the pact and slapped $300 million in sanctions on Japanese exports to the United States. The United States lifted those sanctions partially in November 1987, saying Japan had stopped dumping semiconductors in third countries. By December 1988, however, the United States still had $164 million in sanctions levied on Japanese goods because of the semiconductor pact.

While U.S. officials are clearly angry over Japan’s implementing of the semiconductor agreement, they concede they have no real solutions. Asked about the pact recently at a House Commerce subcommittee hearing, Commerce Secretary Robert Mosbacher said the sanctions imposed against Japan have been only moderately effective. ″We haven’t really come up with an answer that would replace sanctions,″ Mosbacher told the committee.

Asked whether the Bush administration had any alternatives to sanctions that would remedy the semiconductor problem, Mosbacher replied: ″As soon as we figure that out, we’ll let you know.″

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