U.S. Stiffens Its Stance on Japan Trade : Ease Protectionism or Face Retaliation, Diplomat Warns

A high-ranking American diplomat warned Japan on Monday that the United States will no longer tolerate ever-growing bilateral trade deficits while Japan’s market remains “still far from free and open.”

A speech by William Piez, the U.S. Embassy’s minister-counselor for economic affairs, was the most explicit and threatening assault on Japanese protectionism by an American official since the Reagan Administration took office in 1981.

Addressing the Executive Managers’ Assn. of Japan, Piez said: “The huge trade imbalance between our two countries threatens to destroy the very core of the international free trading system.

“None of us wants to see protectionist trade wars,” Piez said, “but if it comes to that, the United States is one of the few nations with the natural resources and the domestic economic strength to go it alone. Japan is not in such a position.”

Have Reached Crossroads

Failure by Japan to import more American products “could lead to serious consequences for your ability to export to the United States,” he said, adding that “we have reached a crossroads in our economic relations.”

Piez declared that the American bilateral deficit spiraled upward from $19 billion in 1982 to $21.7 billion in 1983 to “an enormous $34 billion” last year.

During that time, more and more Japanese exports were flowing to the American market, which took 29% of Japan’s global shipments in 1983 and 37% in 1984, Piez said.

“You now export more to the United States than you do to the European Community, the Middle East and Latin America combined,” he told the businessmen.

Japanese Exports Soared

Piez praised the growth in bilateral trade to $80 billion and said that even a totally open Japanese market would not eliminate the U.S. trade deficit. But he voiced concern that American deficits with Japan have been growing much faster than overall two-way trade.

“Since 1965, the U.S. annual trade deficit with Japan has averaged 22% (of two-way trade),” he said. “In 1983, our trade deficit with Japan was 33.1% of two-way trade. In 1984, our trade deficit with Japan grew to 42.5% of our two-way trade.”

Piez also complained that Japanese exports to the United States soared upward by 32.1% last year, while U.S. exports to Japan increased by only 5.9%, despite strong growth of about 5.5% in Japan’s economy.

Market-opening “trade packages” offered by the government of Prime Minister Yasuhiro Nakasone since 1982, Piez said, “obviously have been ineffective.”

On specifics, Piez singled out high tariffs on imports of forest products--”especially plywood and paperboard”--paper products and aluminum as existing “for purely protectionist reasons.”

Despite moves initiated by Nakasone to simplify and bring into line with international codes Japan’s standards and certifications procedures, Piez complained that “Japan still has a long way to go in creating an open climate which lets a manufacturer or importer know in a timely manner what standards his products are supposed to meet.”

“All too often, certification procedures are blatantly used as a means of excluding imports,” he charged.

Piez said that the United States is concerned that Japan was about to implement new discriminatory standards against foreign telecommunications equipment as the Nippon Telegraph & Telephone Corp. is transformed from a governmental into a private corporation April 1.

He also complained that Japan still has not made it clear whether Nippon Telephone, Japan’s largest user of satellites, will be allowed to purchase American communications satellites.

Certification procedures also have proved a roadblock to imports of American pharmaceutical products and medical equipment, and Japanese promises to accept data provided by recognized testing laboratories in the United States still have not been carried out, he said.

The embassy’s economic chief also charged that Japan’s distribution system “prevents free competition and excludes suppliers not already part of the system of vested interests.” He said Japan should apply its antitrust laws to “improve the openness of your markets for imports.”

As recently as Jan. 2, in a meeting with Prime Minister Yasuhiro Nakasone in Los Angeles, President Reagan resisted taking a tough public stance on the United States’ snowballing trade deficit with Japan. Whether or not Piez’s speech signals a change in the Administration’s approach to Japan is expected to become clearer during two sets of U.S.-Japan trade talks next week and a visit here Feb. 9 to 11 by William E. Brock, U.S. trade representative.