U.S.-Japan Chip Talks Grow Testy

Times Staff Writer

President Reagan announced May 29 that the "framework of an agreement" had been worked out by the United States and Japan in negotiations on microchips.

The promise of an agreement was not the first--nor will it be the last--in a long dispute that involves four separate legal actions by U.S. entities, including one by the U.S. government itself, against Japan's semiconductor industry.

Two weeks after the President's statement, no agreement has emerged--only more bitterness between Japanese and Americans. And the bad feeling goes beyond microchips and suggests basic differences in the two countries' cultures and government concepts.

Japanese say they feel they are being punished for beating the United States at its own game. Japanese companies control 60% of the U.S. chip market and are recognized as being ahead of U.S. makers in mass-production technology.

Americans, on the other hand, say the game was rigged in Japan's favor--in the past, at least--and that it is time for new rules to offset the effects of past policies.

An official at Toshiba, one of Japan's leading producers of microchips, said: "The United States has singled out the Japanese semiconductor industry for punishment."

Public, Private Comments Differ

An American source countered: "What the Japanese are telling us is 'Give us your product and your technology, and we'll stick it in your ear.' "

Such comments are made in private. Publicly, Clayton K. Yeutter, the U.S. trade representative, and Michio Watanabe, Japan's minister of international trade and industry, pose for photographs with an arm around each other's shoulders, dressed identically in T-shirts inscribed "Japan, a Great Importing Nation." The two posed thus for photographers on the day they started a 14-hour marathon session on microchips.

The U.S. position is that Japan does not import enough microchips; that for the past 11 years, it has limited the U.S. share of its market to about 11%. At the same time, the American negotiators say, the Japanese have dumped their microchips in the U.S. market, selling them well below cost in an effort to obtain a share of the market.

The negotiations are being conducted in secret, but, according to reports in the press here, the United States has asked the Japanese government to guarantee a substantial increase in the U.S. share of the Japanese market. Also, the United States reportedly wants Japanese producers to agree to a system of price monitoring in order to prevent their selling at prices below cost.

The basis of the U.S. negotiating position is that the Japanese industry owes its success to industrial targeting carried out under the guidance and supervision of the government. Thus, in the U.S. view, it is the responsibility of the Japanese government to correct the damage that Japanese exports have done to the U.S. industry.

Mid-70s Laws Barred U.S. Firms

Americans recall with bitterness the years that they were shut out of the Japanese computer market. One industry source keeps a list of the 18 Japanese laws in effect until the mid-1970s that forced American companies to share their technology with potential rivals and prevented American computer companies from owning subsidiaries here.

"Would Japanese companies be so competitive today if they had not had a protected market in which to grow strong for so long?" an American close to the electronics industry here asked.

An official of the Ministry of International Trade and Industry countered that in the past, perhaps, the ministry controlled the industry, but that today Japan has moved closer to the free-trade policies of Western countries.

The official said the competitive prices of Japanese chips are the result of superior mass-production technology. The ministry, he said, "cannot direct Japanese companies to hand over their business to U.S. firms; the best we can do is to tell them that it is important to show Americans that our markets are now truly open."

The official also said that laws restricting the activities of foreign computer firms were repealed in 1975 and that U.S. companies should have been able to get into the Japanese market in the years since.

Such arguments tend to infuriate Americans, who point to the ministry's efforts on behalf of the aircraft and jet engine industries, among others. The Japanese government is still spending money to help private companies in those areas obtain American technology.

In the American view, the ministry is arguing free trade on the one hand and on the other continuing to protect infant Japanese industries against foreign competition.

One American observer likened the Japanese position to that of a man who has pushed a car with his wife in it toward the edge of a cliff. "Just because he let go of the car 100 yards before it went over the edge," he said, "does not mean he had nothing to do with subsequent events."

Adding to the testy atmosphere of the negotiations is the threat of U.S. action in the dumping cases. In the next few weeks, Japanese semiconductor manufacturers face the possibility of strong anti-dumping duties.

On Aug. 1, an International Trade Commission ruling goes into effect imposing penalties against Japanese makers of 256K DRAM (dynamic random access memory) chips. It allows the Commerce Department to levy duties ranging from 19.8% to 108.7% against imports of the Japanese 256K chip.

Two anti-dumping cases are still pending. One involves imports of EPROM (erasable programmable read-only memory) chips. The other, filed by the Semiconductor Industry Assn., alleges that the Japanese government has sanctioned a cartel limiting sales of U.S. chips in Japan to between 10% and 12% of the Japanese market.

The ITC has made a final ruling on an earlier anti-dumping case, concluding that Japanese makers of 64K chips had hurt the U.S. industry, and penalties have been imposed. It is not clear that the Administration can nullify the ruling's effect in return for Japanese concessions at the bargaining table.

Also, there are protectionist trade bills in Congress, and one reason for Reagan's announcement of agreement on a framework was to give the impression that progress is being made.

Still, the Japanese newspaper Asahi foresees "American products being forced on Japan without regard to economic factors, including those of quality, price and delivery time."

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