Sanctions Against Japan Approved : Penalty Duties Expected to Affect a Wide Range of Electronic Goods

Times Staff Writers

The Reagan Administration, in a decision that highlights growing U.S. exasperation with Japanese trade practices on a broad array of products, reached agreement Thursday on a plan to impose trade sanctions against Japan for the first time since World War II.

The sanctions, coming in response to acrimonious disputes over semiconductors and supercomputers, would signal a sea change in the often troublesome relationship with one of the country's biggest trading partners, congressional leaders contend.

The Economic Policy Council, a Cabinet-level advisory group, refused to discuss its deliberations Thursday. But Administration sources said that a "consensus" plan for sanctions was approved and that President Reagan is expected to announce, probably as early as today, that the sanctions will take effect April 15.

Difficult to Assess Impact

It is expected that penalty duties will be slapped on a broad range of imports containing Japanese-made semiconductors, ranging from VCRs and other consumer electronics goods to the giant supercomputers--machines costing upwards of $10 million. Industry leaders said it would be difficult to assess the impact of the sanctions on consumer prices until a specific list of targeted products was released.

The sanctions, according to sources, are believed to be fashioned so that the United States will collect $300 million to $400 million in tariffs in the first year. But more importantly, said congressional and industry leaders who have been pushing for the action, it will signal a more assertive posture for the United States in its trade relations and at the same time stave off legislative action to make such retaliatory measures mandatory in cases of flagrant and repeated violations of U.S. trade laws.

In Tokyo, Hajime Tamura, minister of international trade and industry, said today that the Japanese government was "extremely perplexed" that it had not been given "a word of information" about the reported decision to impose sanctions.

Although Japanese trade officials earlier in the week had hinted that sanctions from Washington would be greeted with countermeasures, Tamura said he was not prepared to comment on that issue.

Plans for Visit Approved

However, the Japanese cabinet formally approved plans by Prime Minister Yasuhiro Nakasone to visit the United States from April 29 to May 5.

Administration and industry sources who were briefed late Thursday on the council's deliberations said the State Department, while not opposing the sanctions plan, had at first wanted to delay implementation of sanctions until after Nakasone's scheduled arrival next month for talks with Reagan on trade issues.

But despite State Department concerns over the wider issue of U.S.-Japanese relations, there was apparently no disagreement at the short Cabinet-level council meeting Thursday--one source said it lasted just less than an hour--over the sanctions plan and the timing.

One source quoted a State Department official as saying in the meeting that it was "time the medicine was administered."

Commerce Secretary Malcolm Baldrige and U.S. Trade Representative Clayton K. Yeutter were "very happy with the results," one industry executive said.

Although the proposal, according to those involved in its preparation, called for Reagan to announce the sanctions next Wednesday, it is understood that Yeutter favors an announcement today. The Administration would release a list of products to be included under the plan, and a foreshortened comment period would ensue.

Traditionally, the comment period in such trade practices cases has been 30 to 60 days, during which time the targeted country has a chance to respond and perhaps negotiate a resolution. In all but one case in recent history, the sanctions have been withdrawn during the comment period.

But those drawing up the plan for sanctions against Japan said Thursday that they specifically requested a short comment period because they believed that nothing the Japanese would say could deter the imposition of punitive action and because they feared that a 30-day period, which would end as Nakasone arrived, would put the President in an awkward position.

Inflexible Position

In part, the Administration's hard line has been fueled by Japan's inflexible position on improving access to Japanese markets for U.S. supercomputer makers. Several congressional sources confirmed a report in Thursday's Washington Post that Makoto Kuroda, vice minister of international trade and industry, told U.S. trade officials last month to abandon any hopes for selling supercomputers in Japan--regardless of whether they were superior products to those being made in Japan.

Denied Making Statement

The Japanese Foreign Ministry denied that Kuroda had made such a statement and said that, after a "stern protest" to U.S. government officials for "leaking" the story of the luncheon, it had received an apology from Washington over the incident.

For the most part, the semiconductor trade issue itself has been the biggest bone of contention in the U.S.-Japanese trade dispute over high-technology products. After months of herky-jerky negotiations, the two countries reached an agreement last July 31 that called for Japanese companies to stop dumping memory semiconductors--the tiny, silicon-based circuits often called "computer chips" that are used in most appliances, computers and consumer electronics goods--and to increase purchases of U.S.-made chips to account for 20% of all chip sales in Japan by 1991.

As part of the agreement, the United States suspended two anti-dumping cases and one wide-ranging unfair trade practices complaint. In addition to the devastation that U.S. chip makers claim they have suffered because of predatory pricing practices, the United States has not collected hundreds of millions of dollars in penalty tariffs that it would have if the anti-dumping cases had been completed.

Dumping Complaints Continue

Although the problem of dumping--selling below fair market value as determined by a complex formula that includes cost of production--in the United States seems to have been resolved, the United States has contended that Japanese companies continue to dump in markets outside Japan and that U.S. companies' share of the Japan market has slipped rather than increased.

Japan's trade ministry has issued promises throughout the eight-month span of the agreement to implement the accord. The latest of these came last week, when ministry officials urged Japanese chip makers to further reduce production of chips and said it would tighten chip export controls in an attempt to dry up the "gray market" that has flourished in important chip-using areas such as Singapore, Taiwan and Hong Kong.

Congressional proponents called for the sanctions to remain in effect for a year. Although the stated purpose of the sanctions is to encourage implementation of the agreement, it is unlikely that a solution to the dumping problem alone would be sufficient to persuade the Administration to lift the tariffs. However, sources suggested that quick action to increase foreign producers' access to the Japanese market might be viewed as justification for eliminating the tariffs before a year is out.

At the Semiconductor Industry Assn., the San Jose-based trade group that has led the fight for sanctions, a spokeswoman noted that there had not been an official announcement of the council's decision but said: "We would welcome an Economic Policy Council recommendation for sanctions and would urge the President to accept such a recommendation from his council. Our objective is to assure that the U.S.-Japan semiconductor agreement is fully implemented."

Donna K. H. Walters reported from Los Angeles and Tom Redburn from Washington. Staff writer Sam Jameson, in Tokyo, contributed to this story.

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