Difficult Negotiations Ahead For US-Japan Trade Talks

With eight days to deadline, the rhetoric is getting louder

THE next eight days promises innumerable scenes of United States and Japanese negotiators hustling in and out of meetings in an attempt to reach yet another trade agreement.

The two countries - the world's largest economies - are again trying to smooth out their trade relationship, which has long been marked by inequities and charges of unfair practices.

Officials of both governments privately concede that they think they can conclude at least a partial deal by Sept. 30 - a US-imposed deadline - but the rhetoric is getting more strident in the endgame.

The US Treasury's under secretary for international affairs, Lawrence Summers, warned in Tokyo this week that ``Japan would be making a serious mistake to suppose that [the Clinton] administration will compromise our objectives simply in the interest of reaching agreements.''

Similarly, a Japanese official who declined to be quoted by name said yesterday his government ``will never compromise'' on some issues at stake in the trade talks.

Why are these two governments resorting to such brinkmanship?

One theory suggests that the administration may want to sound tough before concluding agreements that are a lot less concrete than US officials once sought. The Clinton administration came into office vowing a no-nonsense approach toward Japan and promising to obtain trade agreements that assured non-Japanese producers easier access to this country's lucrative markets.

There was an element of this stridency, rarely heard in recent months, in Mr. Summers's speech. ``Japan,'' he said, ``needs to recognize that it needs to import if it is to continue to be given the opportunity to export.''

But, in the face of Japanese resistance and criticism in Japan and elsewhere that the US was proposing to use quotas or ``numerical targets'' to guarantee openness, the US has backed down. US trade officials reject the assertion that they are trying to manage trade, and insist that they simply want ways to assess whether trade deals actually achieve their objectives.

US officials often point to the huge trade imbalance between Japan and the rest of the world - the Japanese last year exported goods worth $122 billion more than they imported - but many economists say that a trade surplus is not a good indicator of market openness. But there is consensus that Japan's markets, despite some recent advances by foreign producers, are still difficult for outsiders to penetrate.

Preaching the value of global free trade and wanting to improve export opportunities for US companies, Washington has sought to use its influence to open these markets further. The US wants the Japanese to agree to ``significant increases'' in the sales of foreign goods here and in opportunities for foreign investment.

While many non-US producers agree with American criticisms of Japan's economy, some critics have blasted the US for acting unilaterally when many countries are trying to solidify the nascent World Trade Organization. The Japanese also decry the unilateralism, but their main worry is that quotas or targets lurk beneath talk of ``significant increases''.

``We took numbers out of it,'' says one US government official in Tokyo, referring to the discussion over trade agreements, ``but they're balking at that.'' Pleading the sensitivity of the negotiations under way, the official also requested anonymity.

Under an agreement called the US-Japan Economic Framework, initiated in July 1993, the two countries are trying to conclude deals covering foreign access to the Japanese insurance market, Japan's automobile and auto-parts markets, and government procurement of medical and telecommunications equipment.

In all three cases, the US says regulatory and procedural barriers favor Japanese companies. The Japanese say they are willing to deregulate and eliminate barriers, but insist they cannot certify the outcome of such reforms. ``We can make the government process more transparent,'' the Japanese official says, ``but we cannot guarantee the results.''

The two sides are said to be close to an agreement in the insurance area, and far from any compromise in the automobile and auto-parts sector. The discussion on government procurement is somewhere between compromise and confrontation.

Although any prediction is speculative at this stage, officials say the two sides may conclude agreements on insurance and government procurement and agree to continue talking about the auto area.

The partial deal would forestall what looms on Sept. 30 - a US declaration that Japan has engaged in unfair trade practices, which would initiate a legal process that could result in the imposition of punitive tariffs against Japanese goods.

Japanese officials have said they would refuse to negotiate under such circumstances.

The official interviewed yesterday indicated a partial softening of that stance, saying Japan might only refuse to talk about the sector in which sanctions are threatened.