US Mulls Trade Policy

ANOTHER round of US-Japanese trade negotiations begins today as Bush administration officials try to break through distribution barriers, price fixing, and a host of other restrictions American businesses find in Japan. These barriers could deprive the United States of as much as $30 billion a year in exports, according to a report from the President's Advisory Committee on Trade Policy. With an eye toward eliminating Japanese restrictions, the Bush administration introduced the Structural Impediments Initiative (SII) last May to address the structural problems in Japan that contribute to the severe trade imbalance.

Today and tomorrow, the US trade representative and officials from the Treasury and state departments will hold the second of bimonthly meetings with their Japanese counterparts to discuss SII. Simultaneously, US businessmen and academics will testify before the Senate Finance Subcommittee on International Trade, chaired by Sen. Max Baucus (D) of Montana. The committee will be assessing the administration's approach to SII.

``The US cannot continue to tolerate - either politically or economically - a $50 billion bilateral trade deficit with Japan,'' says Senator Baucus. The SII negotiations, he says, ``are the most important trade negotiations that the US has ever entered into.''

US concerns over market access are exacerbated by Japan's keen investment interest in the United States.

The timing of the hearings, according to a Baucus staff member, is ``to demonstrate that there is a strong feeling that SII needs to bear results.'' The National Association of Manufacturers, the US Chamber of Commerce, and producers of auto parts, electronics, and wood products, as well as economists, will be testifying.

``The SII discussion is hopeless and useless - we're going no where with the Japanese,'' asserts Clyde Prestowitz, Jr., Japan trade specialist and senior associate at the Carnegie Endowment. ``If anything, we've gone backwards. Our Japan policy and procedures are bankrupt,'' he says.

Rep. Richard Gephardt (D) of Missouri says that SII ``holds the greatest promise'' for effecting ``change in Japan's societal and cultural practices.'' The congressman, who last proposed the Gephardt Amendment in 1987 (designed to require a reduction of Japan's trade surplus with the US by 10 percent each year for four years), stresses that the ``US-Japan problem is at least two-dimensional.''

Not only must the US increase public and private savings, provide more support for high-tech and applied research, and put the Secretaries of Trade and Commerce on the National Security Council, he says, ``we have to force, push, cajole and persuade the Japanese to open up their markets to the US.''

Officials at Japan's Ministry of International Trade and Industry (MITI) say plans to step up US imports are underway, with MITI procurement agents based in New York, Los Angeles, and Chicago. The ministry is also putting together a strategy to increase imports from smaller US companies; MITI will work with each state government toward that end.

Mr. Gephardt agrees that progress has been made, but not enough: ``I would tell the Japanese that the time is up. We can't fool around with this a lot longer. The American people want access, and if the Japanese don't stop bid-rigging and such, we're going to take unilateral action.''

Next March, US Trade Representative Carla Hills is scheduled to issue a preliminary report on the effects of SII and in July she will issue a final report. Apart from these dates, SII is open-ended. There are no benchmarks yet for success, and just how Ms. Hills measures it is open to intepretation.

``Our negotiators desperately want to report successes,'' says Mr. Prestowitz. ``The last thing the president wants to do is retaliate against the Japanese, and Carla Hills must support that. But despite all of the successes we report, our companies are not penetrating the market.'' In an unusual joint report issued Nov. 2, the Committee for Economic Development (CED) and the Japan Association of Corporate Executives called for a combined strategy of ``import-pull'' by Japanese companies and ``export-push'' by US companies.

According to Robert Holland, CED president, the report is the culmination of a year-long negotiation: ``We overcame major stumbling blocks. We found a prevalent attitude among the Japanese government and business leaders that they have already bitten the bullet by loosening spending patterns and providing consumption funding, for example.''

The report recommends that Japanese manufacturers and trading houses take the lead in opening up the country's distribution system to the US. It also advises US exporters on meeting Japanese quality-control standards and fixed delivery time, as well as tailoring products for Japanese use. ``We frankly don't think enough US companies are trying to penetrate the market successfully,'' Mr. Holland says.

In his statement for the hearings, Baucus counters this assertion: ``For years, Japan has told the rest of the world that Japan is different. Snow ski exporters were told that they could not export skis to Japan because Japanese snow was different. US ranchers were told that they could not export beef to Japan because Japanese intestines were different ... I have always taken Japan's claims of uniqueness with a grain of salt. Usually they were simply excuses for protectionism.''

US companies, such as Ford Motor Company and General Motors Corporation, with a huge presence in the European Community, Latin America, Canada, and Australia, cannot move into Japan, says Prestowitz. It's not for lack of trying, he adds. ``We are two players playing by a very different set of rules. Japan is obssessively homogeneous, an open market for them means more Japanese production, not more competition.''