Japan Expected to Show $18-Billion Surplus With U.S. : VCR Boom Fuels Electronic Trade Gap

Japan will register a surplus of about $18 billion in electronics trade alone with the United States this year, John J. McDonnell Jr., spokesman for the Electronic Industries Assn. of the United States, said here Wednesday.

He added, however, that the bilateral trade deficit in telecommunications equipment is likely to decline--for the first time.

At a news conference, McDonnell agreed that nearly a fourth of the $8.9-billion electronics trade deficit that the United States had with Japan in the first six months of this year can be ascribed to Japanese exports of videocassette recorders, which no American company makes. Through June, Japan had exported 8 million VCRs valued at $2.1 billion to the United States, he said.

He attributed much of the rest of the overall electronics deficit to a lack of competitiveness on the part of American makers of consumer electronics. Because of high wages in the United States, “it has become impossible for American firms to compete in consumer electronics products that must retail at a price of $400 or less,” he said.

American Telephone & Telegraph, for example, has been forced to close a plant in Shreveport, La., that had employed 1,000 workers and to set up an overseas plant, in Singapore, for the first time in the company’s history to manufacture telephones for the American market, he said.

But, he said, American electronics firms continue to be highly competitive, in terms of both price and quality, on “big-ticket” items, particularly telecommunications equipment. When American firms have lost contracts to Japanese and European competitors in other countries, it has been because they cannot offer financing on terms as attractive as their competitors, he said.

“The (U.S.) Export-Import Bank is a joke,” he said. “Most American firms can get better financing on the open market than from the Ex-Im Bank.”

Trade with Japan this year just in telecommunications equipment year will contribute $1.6 billion to the American deficit, he predicted, a decline of about $200 million compared to last year. During the first six months of 1985, Japan exported to the American market telecommunications equipment worth $853 million more than it bought from the United States, he said.

He attributed the expected decline in the telecommunications trade deficit to more Japanese investment and production in the United States. Results of the measures that Japan has taken this year to open its telecommunications market will not appear in increased U.S. sales to Japan until “at least next year,” he said.

McDonnell said that, despite the “significant new opportunities” that Japan’s recent market-opening measures will offer for American firms, his association still intends to support a bill submitted by Sen. John C. Danforth (R-Mo.) to force President Reagan to act against countries that refuse to open their telecommunications markets to American products. He said a rewritten version of the Danforth bill is aimed not only at Japan but also at Canada and Western Europe.

Request for Purchase Quota

He reiterated a request, which Japanese officials have repeatedly rejected, for Nippon Telegraph & Telephone Corp. to set a quota for purchases of American telecommunications equipment.

“Even though NTT has opened its procurement,” he said, “there was a long history of not having an open market. . . . In the absence of an affirmative action program that actually mandates percentages (for purchases from American firms), it’s difficult to achieve the kind of results American industry expects.”

McDonnell made no predictions or recommendations, but he pointed out that the Reagan Administration has given Japan an official notification that will enable the United States to end its government procurement agreement with Japan in October--if it chooses to make the break at that time.

He described as accurate a charge made by Hisashi Shinto, NTT president, that American telecommunications equipment purchased by the giant telephone company was defective. But he said that “in all but one case,” the defects arose from normal troubles that any company experiences in dealing with a new supplier.