Who Wins, Who Loses in a Possible US-Japan Trade War

Experts say sanctions aimed at opening Japan's market could backfire on US

WITH President Clinton on the verge of imposing punitive trade measures against Japan, a number of analysts say any such sanctions might be counterproductive.

Even such industries as automaking that stand to benefit from a more open Japanese market do not relish the prospect of a trade war.

``The Japanese have been given a wake-up call'' by Mr. Clinton, says a spokesman for the American Automobile Manufacturers Association, which represents Ford, General Motors, and Chrysler. ``But we hope it doesn't come to [sanctions].''

On Tuesday, just days after a United States-Japan summit in Washington failed to break a deadlock over further opening of the Japanese market, US Trade Representative Mickey Kantor took the first step toward sanctions by claiming that Japan had violated a 1989 pact to open its cellular-telephone market. He planned to announce sanctions within 30 days.

[Yesterday, Japanese Prime Minister Morihiro Hosokawa and top Japanese trade negotiators agreed to put together a package of measures to open Japan's markets, hoping to avert a trade war with the US, the Associated Press reports from Tokyo.

[The package, still to be worked out, will focus on four areas -

promotion of imports, deregulation, tougher anti-monopoly enforcement, and fairer government purchasing. All four reflect key US trade demands.

[``We are more than prepared to take further market-opening measures,'' Koichiro Matsuura, Japan's chief trade negotiator, said. Government spokesman Masayoshi Takemura told reporters the new market-opening measures might be worked out before a meeting of the finance officials of the Group of Seven industrial nations on Feb. 26.

[But still to be solved would be the key issue under dispute: a US demand for numerical benchmarks, or ``objective criteria,'' to gauge the success of trade agreements.]

The Clinton White House, in seeking ``objective criteria'' under so-called ``framework'' talks with Japan, is studying a number of options for retaliation. These include the so-called Super 301 trade provision that permits the president to impose sanctions against ``unfair'' trading partners. A trade war could hurt both the US and Japan, says Virginia Tech professor Rich Wokutch.

The US economy could suffer from disruption of Japanese technology or delivery of parts integral to manufacturing US products, he says, while Japan, which has become less dependent on the US market, still has much to lose in a trade war.

``Because of the interconnections, you can't just hurt Japan'' without damaging the US, adds James Auer, director of the Center for US-Japan Studies at Vanderbilt University in Nashville.

The political climate within the US may not facilitate a trade war anyway, Mr. Auer says. ``If the US economy continues to grow, the chances of a trade war are not good'' without the public perceiving a need for more trade.

At present, the US and Japan are conducting ``a certain degree of political posturing,'' Mr. Wokutch says. While in past trade talks, the Japanese have been able to ``wiggle off with ambiguous agreements,'' Washington hopes the threat of a trade war could force Japan to come to an agreement.

The issue of trade with Japan is deeper than a simple portrayal of the US as an open market and Japan as a closed one, Auer says.

``If they completely opened their market, that would not solve the [trade imbalance] problem. [The problem is that] the US buys too much, not that Japan buys too little.'' The US has a tendency to ``scapegoat'' Japan.

Clinton, who was elected on a ``jobs, jobs, jobs'' platform, is forced to push Japan hard for more trade in order to enlargen job opportunities, says Alan McAdams, a professor of economics and management at Cornell University in Ithaca, N.Y.

Last year, Clinton officials indirectly put pressure on Japan by letting the value of the dollar slip against the yen, making Japanese exports more expensive and American imports into Japan cheaper.

The US could wage the same kind of currency-exchange tactic in coming days. The yen has already risen a few points since the collapse of trade talks last Friday.

The timing of the decision by Mr. Kantor was unrelated to the framework talks, but provided the Clinton administration some small ammunition to make its point again.

Kantor noted that Motorola Inc., a ``global front-runner'' in cellular telephones, was impeded from expanding its business in Japan over the past 10 years.

Motorola claims it was not able to provide full service to the same areas as its two Japanese competitors. At one point, a Japanese company that was to have helped install Motorola equipment refused delivery of the Motorola products. Motorola currently is only able to provide service to 40 percent of the region between Tokyo and Japan's third largest city, Nagoya, Kantor said.