While Talking Again, US, Japan Are Still Far Apart on Trade

AT Tom Hatton Pontiac in metropolitan Washington, Japanese-made Isuzu jeeps share the same lot as General Motors sedans. But in Japan, where manufacturers often punish local dealerships for carrying imports, American-made vehicles face slow sales.

``The hundreds of millions of dollars invested in the engineering and marketing of these [US] products will be money poorly spent if real access to the Japanese consumer is not realized,'' says Andrew Card, president of the American Automotive Manufacturers Association (AAMA).

This trade inequality is just one example of the much broader inequities in bilateral commercial relations that Washington is seeking to redress. Japan has run more than a $50 billion surplus with the United States for six of the last eight years, including a record $60 billion imbalance in 1993. According to the AAMA, automotive trade has accounted for between 60 percent and 75 percent of that imbalance over the same period.

Last week, US and Japanese negotiators met here and agreed to re-open the so-called ``framework talks,'' a market-opening effort President Clinton launched almost one year ago. The initiative collapsed in February after Japan refused US demands.

A senior Japanese government official, who described the resumption of discussions as ``extremely important ... for bilateral relations as a whole [and] for the well-being of the entire international economy,'' said that Japan was ready to address the four priority areas of the US: government procurement in both telecommunications and medical technology; insurance; automobiles and auto parts; and US export promotion.

But the official was unclear about whether his government would respond to US demands for measureable, quantifiable progress within specific sectors.

US Commerce and Treasury Department officials say privately that Tokyo is no closer to meeting Washington's hoped-for targets, but that the renewal of talks was at best an important demonstration of intent to negotiate.

Gary Horlick, a top Washington-based trade lawyer with O'Melveny & Meyers, echoes the prevailing assessment that last week's decision was one of pragmatism. ``Neither the US nor Japan wanted the stalemate to go on,'' he said.

Many observers have noted that both sides want to quell fears about turmoil in world financial markets, an expected development if the negotiations were to break down again. Both the value of the Japanese yen and the level of US interest rates have shot up since the talks failed in February, making the costs of Japanese exports more expensive and increasing the cost of US capital. Mr. Horlick says that ``the politics of the US-Japan relationship isn't driven by the trade deficit. The relevant indicator is the percentage of foreign direct investment in Japan.... If Japan hadn't prohibited foreign automakers from making investments in Japan in the 1950s, we might have a trade balance today, because the numbers show that exports follow investment.''

``There's no point in investing in Japan if there's no distribution system,'' says a former trade official during the Bush administration who now works for a major US corporation. The US should ``press Japan on structural issues,'' an avenue that was under way during the Bush administration under trade negotiations known as the Structural Impediments Initiative.

The prices of goods, the former US official adds, ``are the clearest barometer of whether the market is working.''

In Japan, the cost of goods is on average 40 percent higher than any other developed country - ``all a function of a restricted market.''