U.S. Envoy Sees Progress on Japan Trade Issues

After a week of intense trade talks here, Under Secretary of Commerce Bruce Smart said Friday that he is returning home “satisfied that on all the issues we discussed, with the exception of tobacco, we made the progress I hoped we would make when we left Washington.”

Besides tobacco, Smart and a team of U.S. negotiators that he headed talked to the Japanese about buying more U.S. automobile parts, giving U.S. firms access to construction contracts for a $6-billion airport project, granting a license that would benefit a U.S. maker of radiotelephone equipment and holding back on machine tool exports to the United States.

Without giving details of his team’s reputed progress, Smart said, “Undoubtedly there are observers and critics in the United States who will believe that whatever we have achieved this week is not enough and that . . . we should have proceeded further.”

Japanese officials were cautious in their appraisal of the talks.

An official of the Ministry of International Trade and Industry argued that the real reason U.S. auto parts exporters do not sell more in Japan is the poor quality and uncompetitive prices of their products. He denied U.S. charges that American parts suppliers are unwelcome in the so-called inner circles of Japanese auto companies.

Last year Japan exported $5.3 billion worth of auto parts to the United States while importing only $300 million worth.

The Japanese appeared more receptive than in the past to a U.S. request to help the ailing U.S. machine tool industry by setting up manufacturing facilities in the United States. But a ministry official said that if the Reagan Administration is highly concerned about the strategic importance of the American machine tool industry, it “would be better off making investments aimed at strengthening that industry rather than asking Japan to hold back our exports.”

Smart said he had engaged in hard bargaining on the Kansai Airport project near Osaka. Both sides agreed that the Japanese should hold a seminar for the benefit of American companies hoping to participate in the project.

Smart said he had “urged the Japanese government in the strongest terms to award no new contracts until after the seminar is held and American companies’ proposals are received.”

He did not receive such assurances, but a Ministry of Transport official said that “there is still plenty of time for American companies to bid” for later phases of the work.

U.S. hopes of taking part in the huge early phase, including the provision of rock-crushing machinery for construction of an artificial island on which the airport will be built, were dashed when it was learned that most of that work had already been parceled out to local contractors.

Another decision that could affect U.S. exports to Japan is the pending choice by the Ministry of Posts and Telecommunications of a second provider of cellular radio telephone services. The U.S. firm Motorola is allied with one of the bidding consortiums.

“This decision,” Smart said, “will determine whether a foreign equipment source will enter the Japanese (cellular phone) market or whether the market will remain exclusively in Japanese hands, despite the approval and accepted excellence of U.S. and European technology.”

On the thorny issue of U.S. access to Japan’s cigarette market, Smart said he reminded officials here that negotiators are under a time limit because President Reagan initiated an unfair trade practice case on tobacco last September under the Trade Act of 1974, which provides for retaliatory measures.

“We have had no success so far in getting the government of Japan to consider changes,” Smart said. Reagan must make a finding on retaliatory measures by Sept. 15.

An official of the Ministry of Finance, which controls the tobacco monopoly, said that “much progress had been made” in dealing with U.S. complaints about access of American cigarettes, which hold only a 3% share of the market here, but added that tobacco is a “political issue” and that “many (Japanese) politicians are involved.”