Computer Chip Fight Is Settled : U.S., Japan Agree on Anti-Dumping Plan, More Access
The United States and Japan on Thursday settled a longstanding trade dispute over semiconductors, agreeing to a plan to prevent dumping by Japanese makers and to give U.S. companies greater access to Japan’s computer chip market.
As part of the settlement, the U.S. Commerce Department agreed to suspend two anti-dumping cases, and the Japanese government, in turn, agreed to establish systems to monitor Japanese companies’ compliance with fair-market pricing policies and help U.S. firms achieve as much as 20% of chip sales in Japan.
The five-year agreement was reached after nearly a year of negotiations involving what has been described as one of the most hard-fought trade battles ever.
Heart of Matter
Semiconductors, also called computer chips, are the tiny circuits at the heart of most electronics goods, including computers. The U.S. chip-making industry has been hailed as the world’s technological leader and the key to the United States’ retaining its lead in the information processing field.
The settlement comes amid deepening concern about the U.S. trade deficit and growing protectionist inclinations in Congress. Of the predicted $170-billion trade deficit this year, a $20-billion shortfall is anticipated in electronics trade with Japan alone, according to the American Electronics Assn.
Pact May Fall Short
U.S. government and industry officials had hoped the negotiations would culminate in firm, enforceable commitments to end what they regard as predatory pricing and pry open stubbornly resistant Japanese markets. Most observers believe that while the settlement makes some progress on each of those issues, it falls far short of hopes that it would set a new tone for U.S.-Japan trade relations.
One of the most contentious elements of the negotiation has been U.S. industry’s demand for greater access to Japan’s market. Although the Japanese government has agreed to promote greater purchases of U.S. chips by Japanese customers, the agreement does not specify sales volumes or market share percentages.
A private document, to be circulated among U.S. and Japanese companies, will address market share figures, sources close to the negotiations confirmed. It is believed the “side letter” will set a 20% market share as a target for U.S. sales in Japan--a figure more than double U.S. companies’ current penetration.
In announcing the agreement during a White House briefing, Special Trade Representative Clayton K. Yeutter called it “one of the most important bilateral agreements that has ever been negotiated” by the United States. In a statement, President Reagan called the agreement a “landmark pact.”
And in Japan, Minister of International Trade and Industry Hajime Tamura said that solution of the semiconductor issue “holds extremely important significance” for overall U.S.-Japan economic relations. He also said he expects the agreement to contribute to “the healthy development of both countries’ semiconductor industries.”
In general, the agreement:
--Calls for the U.S. Commerce Department to suspend two cases that charged Japanese manufacturers with “dumping” computer memory chips, selling them at below fair-market price, in the United States.
--Requires the Japanese companies to sell chips here at fair market value and to provide the Japanese Ministry of International Trade and Industry with cost and pricing information.
--Provides for consultation between the governments within a 14-day period if the United States suspects subsequent dumping.
--Provides mechanisms for the Japanese government to help U.S. producers sell more chips to Japanese users.
The three U.S. companies that had accused Japanese makers of dumping EPROM--erasable programable, read-only memory--chips in the United States, said they would press for the Commerce Department to make a final determination in that case, even though it has been suspended, so that if the Japanese rivals resumed dumping, the penalty duties could be reinstated immediately. In both chip-dumping cases, preliminary rulings found Japanese makers guilty of selling chips here for less than fair-market value.
Although industry officials said they were “very satisfied” with the agreement, analysts and trade experts gave the agreement mixed reviews and said they doubt that the pact would have long-term beneficial effects for U.S. companies.
“If this removes the pressure from the U.S. government to resolve the issues of dumping and equal access, then it’s a terrible mistake,” said Michael Borrus, an economist at the Berkeley Roundtable on the International Economy at University of California at Berkeley. Most participants in the negotiations said the agreement will require close monitoring and stringent enforcement to be productive.
U.S. companies should adopt a “wait and see” attitude, said Rep. Les AuCoin (D-Ore.), a vocal advocate of a negotiated settlement. “Despite the good news, we’ve got to realize that this agreement is just a piece of paper unless it is effectively implemented,” he said. Vigilance is necessary “to make sure that both countries live up to their end of the bargain.”
“We admit this will only work if the Japanese government wants to make it work,” said Andy Rothman, spokesman for Advanced Micro Devices, one of the five largest U.S. chip makers and a party to one of the dumping suits. “We will be well satisfied if a different climate greets our representatives calling on customers in Japan and if there is an absence of dumping.
“We are convinced that in a fair and competitive environment, we will flourish.”
The other two complainants in the dumping suit were Intel and National Semiconductor.
Now, according to the Semiconductor Industry Assn., a San Jose-based trade group, U.S. companies have only an 8.1% share of the estimated $9-billion annual sales of chips in Japan. U.S. companies dominate the worldwide market, commanding 55% of the estimated $22 billion in sales in 1985.
Although the Japanese eliminated chip tariffs, U.S. companies say business practices have systematically held their share there at about 10%. The Semiconductor Industry Assn. has said in fair market conditions, U.S. companies would have about a 30% share of sales in Japan.
The side agreement apparently sets a target of 20% of Japan’s sales for U.S. companies within five years. That would increase sales there from the current $640 million to more than $4 billion of estimated 1991 sales of $20 billion.
Sam Jameson reported from Tokyo and Donna K.H. Walters from Los Angeles. Times staff writers Robert Rosenblatt and Eleanor Clift in Washington also contributed to this story.
