Clinton Takes `Show Me' Stance On Trade

Friday, February 11, Washington, D.C.

THE grand power drama that once swirled around Soviet-US summits has moved east. Now the world watches confrontations between leaders of the world's two economic giants: Japan and the United States.

Tomorrow, President Clinton and Prime Minister Morihiro Hosokawa may have the most dramatic summit showdown in the post-cold-war era. Unlike his go-easy-on-Japan Republican predecessors, Mr. Clinton has set a stiff test for Tokyo to open its markets, both measurably and soon. He wants this summit in Washington to produce a deal that would create tens of thousands of ``export jobs'' for the US (up to 200,000 by one official estimate).

Mr. Hosokawa, whose own job remains politically shaky, is under pressure from bureaucrats and business to keep out competitive American products and services.

During Clinton's first year in office, the US became surprisingly brusque, blunt, and brash with Japan on economic issues. Tokyo officials wondered whether they should finally adopt the Western way of clearly saying ``no''.

By mere public statements in the first half of last year, US officials pushed up the value of the yen by almost one-fifth, a move that raised the price of Japanese exports while lowering prices of American goods in Japan. Then, last fall, a threat of economic sanctions forced Japan to promise a more open construction market.

Under US pressure, Mr. Hosokawa plans to bring to the summit fresh news of a $55 billion income tax cut, part of a larger $138 billion economic-stimulus package. The package is designed to boost a recession-stuck domestic economy and bring in more American imports.

But the cornerstone of Clinton's no-compromise stance with Japan is a hard-fought agreement reached last July when he visited Tokyo. He and then-Prime Minister Kiichi Miyazawa agreed to a whole new set of trade negotiations, dubbed the ``framework'' talks, which focus on opening three major markets: Government procurement (mainly in telecommunications and medical equipment), insurance, and automobiles. The last accounts for almost half of an estimated $50 billion trade imbalance.

But the main stumbling block in the framework talks has been a dispute over how to measure the results of any trade agreement. Clinton wants a ``results-oriented'' pact. The US, for instance, has asked that Japanese bureaucrats review the foreign-parts purchase plans of Japanese automakers.

His stance reflects a distrust of Japan among many administration officials, based on a new perception that Japan has been a unique mercantile state that must be treated differently.

Clinton wants an affirmative-action plan that compels Japanese officials to roll back any hidden discrimination against foreign competition.

``What we are looking for in the framework is progress in Japan getting into step with the world economy,'' US Treasury Secretary Lloyd Bentsen said in January.

Both sides agreed last July to lay out ``objective criteria'' in assessing whether foreign firms had penetrated particular Japanese markets. But Japan has insisted that it cannot accept ``numerical targets'' or ``managed trade'' - terms that the US officials claim they have not used.

Japanese bureaucrats say they cannot meddle in their market. ``Does the US really want to have Japan Inc. again?'' asks Japanese economist Yoshio Nakamura.

The US claims that Japanese officials already meddle in what they describe as one of the most managed economies in the developed world.

A model for Clinton officials, ironically, is a move by President Reagan in 1986 that forced Japan to agree to allow foreign firms to have a 20 percent share of the Japanese computer semiconductor market.

Just before the summit, as the talks bogged down, US officials warned of using ``other options,'' which was widely seen as a threat to use Sec. 301 of US trade laws and impose economic sanctions against Japan.