U.S. Warns Japan to Open Markets : Nakasone Told New Trade Barriers May Spur Congressional Retaliation

A special envoy of President Reagan told Prime Minister Yasuhiro Nakasone on Sunday that a set of government ordinances implemented by Japan today threatens to spur passage of retaliatory legislation by Congress.

The envoy asked Nakasone to intervene personally to open Japan’s telecommunications market to U.S. companies.

Gaston Sigur, a member of the National Security Council staff, delivered a letter from Reagan to Nakasone asking the Japanese leader to become “personally involved and exert your leadership” to open up Japan’s markets, especially in the telecommunications field.

“Maintaining free trade is essential to maintaining the close partnership” of Reagan and Nakasone, Japanese newspapers quoted Sigur as telling the prime minister.

He then added, a U.S. Embassy spokesman confirmed, that the Senate “even this week” might pass legislation forcing the United States to retaliate against Japan in telecommunications trade.

‘Injure Overall Relations’

“If we fail to stop the rise of protectionism, it will create not only problems for President Reagan’s belief in free trade but also injure overall U.S.-Japan relations,” Sigur was quoted as telling the prime minister.

Nakasone replied that he will “exert my full efforts to avoid this crisis.” He said that he will instruct his Postal and Telecommunications Ministry to try again to come up with solutions to resolve the telecommunications dispute “as soon as possible.”

He added that he will appeal to the Japanese public to cooperate in opening all markets here when his government announces a major package of market-opening measures on April 9.

That package is expected to deal with issues in electronics, forestry products and pharmaceuticals and medical equipment--which, along with telecommunications, have been singled out by the Reagan Administration for special emphasis.

Sigur and Undersecretary of Commerce Lionel H. Olmer, who arrived here Saturday to make the unprecedented appeal to Nakasone, warned the prime minister that without further concessions on the telecommunications issue, the Senate Finance Committee might approve retaliatory legislation Tuesday and that the Senate might enact it “even this week,” a U.S. Embassy spokesman confirmed.

Olmer, Nakasone was told, will testify before the Senate committee Tuesday on the results of telecommunications negotiations with Japan.

Called ‘Final Effort’

The weekend mission by the two envoys was described Friday by Marlin M. Fitzwater, deputy White House press secretary, as “a final effort to get access for American exporters to Japanese markets.”

Japan put into effect today a new set of government ordinances that will force American telecommunications firms to meet 30 different standards to sell equipment here--a measure that Sigur and Olmer told Nakasone is unacceptable to the United States.

The envoys also complained that the new telecommunications measures lack “transparency” and fail to provide opportunities for American opinions to be reflected in future rule-setting procedures.

The ordinances were published in a special 128-page edition of the government gazette, which was sold out quickly at government publications offices.

Sigur and Olmer also met Sunday night with Foreign Minister Shintaro Abe and with Postal and Telecommunications Minister Megumu Sato to reiterate Reagan’s appeal. They flew back to Washington aboard a government aircraft today.

Even before Sunday’s meeting, officials of the Postal and Telecommunications Ministry told Japanese reporters that a new round of negotiations will be held over the next 60 days in an attempt to ease U.S. protests over the specifications for quality levels that the new ordinances spell out.

Nakasone told Sigur and Olmer that he will order the new round of negotiations to be speeded up in an effort to reach a solution “without waiting 60 days.”

“I would like to get the new consultations started even beginning tomorrow,” Nakasone told the envoys.

Laws enacted last Dec. 20 order the historic end to 105 years of government monopoly control of telecommunications, including the transformation of the governmental Nippon Telegraph & Telephone Corp. (NTT) into Japan’s largest private company.

The contents of the reform laws were described by American negotiators as early as January as “a litmus test” of Japan’s intentions to open up its markets. Reagan’s decision to send Sigur and Olmer here for the 11th-hour appeal to Nakasone demonstrated that the Administration believes that the new ordinances fail that test.

Full Access Sought

U.S. negotiators had hoped to take advantage of the reforms to ensure that American firms would gain full access to the potential $10-billion telecommunications market here, the world’s second largest.

Last year, the United States experienced a $36.9-billion trade deficit with Japan, about $1.4 billion of it in telecommunications trade.

The envoys’ emergency trip came three days after Congress reacted strongly to Japan’s announcement that, while it would restrict passenger car exports to the United States for a fifth year, it would nevertheless allow quota limits to rise 24.3%, from 1.85 million to 2.3 million vehicles. On Thursday, the Senate adopted by 92 to 0 a resolution urging the Administration to take steps within 90 days to curb Japanese imports if Japan fails to buy more American products.

Nakasone told Parliament on Friday that the Senate resolution resulted partly from “a cultural and perceptional gap” between the United States and Japan. But on Saturday, he acknowledged that Japan “must recognize the seriousness of such a resolution and adopt measures accordingly.”

U.S. Demands Not Met

The new ordinances fail to meet U.S. demands that a requirement for registration with the Postal and Telecommunications Ministry be dropped for firms wishing to enter large-scale “value-added network” business (which is called “enhanced services” in the United States). NTT’s monopoly in that business field ended today.

Value-added network firms will lease lines from the telephone company to provide “interpreting service” between otherwise incompatible computers owned by third parties and will be able to offer accompanying telephone, facsimile and data processing service, enabling business firms to automate vast segments of clerical, accounting and research work.

Despite the remaining points of major disagreement, Japan did agree to go along with a wide range of other American demands, according to Akiyoshi Takada of the telecommunications bureau of the Postal and Telecommunications Ministry. These points, he said, include:

--A single, independent certification commission that, contrary to the ministry’s original plan, will exclude representatives of Japanese electronics firms. NTT, which until today had certified all telecommunications equipment used in Japan, also will be excluded as a “judge” in the certification process.

--Permission for firms to submit their own corporate data on quality standards to gain certification for sale in Japan, instead of submitting the actual equipment for testing in Japan.

--Granting single “type approval” for machinery, instead of requiring inspections of every machine.

--Guarantees that the giant telephone company, as a private firm, will not use income from its profitable telephone business to subsidize its value-added network service--thus ensuring fair competition with new firms entering only the value-added network business.

30-Day Processing Period

Although not included in the new ordinances, a set of guidelines has been drawn up by the ministry guaranteeing that applications from firms seeking to enter the value-added network business will be processed within 30 days, Takada said. The ministry originally had not specified that time limit. Established firms will be asked to submit only profit-and-loss statements for the last three years, while new firms will be required only to submit a plan for raising capital, instead of a detailed report spelling out future business plans, he added.

Olmer, in negotiations in Washington last week, demanded that the Postal and Telecommunications Ministry permit firms to merely report their intention to enter the large-scale value-added network business, but Moriya Koyama, vice minister of the ministry, said the new laws require registration procedures to be taken.

The most serious dispute, however, involved Japan’s insistence that a whole series of standards be fixed for telecommunications equipment.

Nippon Telegraph & Telephone begins new life today as a private company. Part IV, Page 1.