Yeutter: Japan, U.S. Not Headed for Trade War : Official Tells Senate Panel Current Sanctions Are Sufficient to Get Results

Hoping to defuse economic tensions with Japan, U.S. Trade Representative Clayton K. Yeutter said Thursday that Japan is a “great and respected friend” of the United States, despite the dispute over semiconductors, and insisted that the two nations are not heading toward a trade war.

Yeutter sought to reassure skeptical members of the Senate Finance Committee, who want tougher steps to force Japan to buy more American-made goods, that the Reagan Administration is aggressively defending U.S. workers and businesses against unfair imports.

One member, Sen. Donald W. Riegle Jr. (D-Mich.), asked: “Are we supposed to let plant after plant close, job after job go overseas?”

Another member, Sen. John Heinz (R-Pa.), said in unusually blunt language: “The Japanese have been getting away with murder for years, and now that our country is littered with the bodies of dead and dying industries, the Administration is saying it may impose capital punishment in the future.”

But Yeutter insisted that last week’s decision to impose 100% tariffs on many Japanese products--such as computer components and color television sets--will send “a signal to our Japanese friends.” The heavy penalties will be imposed April 17 in retaliation for Japanese firms’ “dumping” of semiconductors--the tiny silicon chips used in computers and many electronic products--at unfairly low prices.

“I don’t know how we can be a whole lot more aggressive than we have been,” Yeutter said of the action, the first U.S. trade sanctions against Japan in the post-World War II era.

However, he emphasized, the two nations “will get over this hurdle sometime in the near future.”

“We’re prepared to lift the sanctions if the government of Japan indicates its compliance” with last year’s agreement not to sell semiconductors below cost in markets where U.S. and Japanese firms compete, Yeutter told reporters, though it could be weeks or months before convincing evidence is available that the chips are no longer being sold unfairly.

Yeutter advised the legislators not to tamper with the President’s authority on restricting imports--the ultimate weapon of trade policy. Such “H-bombs ought to be dropped by the President and nobody else,” he said.

Nevertheless, the committee is considering a wide-ranging trade bill that would sharply restrict the President’s discretion in trade disputes and automatically impose penalties against imports in certain unfair trade cases. Currently, the President may use foreign policy or national security considerations to ignore or override a recommended punishment.

The bill also would make tariff cuts, now handled by the President, subject to a congressional vote.

Chairman Lloyd Bentsen (D-Tex.) said that “the protectionist policies of Japan and other countries will not change until American policy changes, not just for the semiconductor industry but for the aircraft industry and the computer industry and all the other industries in this country that have a legitimate complaint about foreign protectionism and trade distortions.”

The recent Japanese purchase of an American giant “supercomputer” “will not allay the concerns of this committee,” said Sen. John D. (Jay) Rockefeller IV (D-W.Va.). “I hope Japan will not underestimate the Senate Finance Committee.”

Sen. Max Baucus (D-Mont.) warned: “If Japan is going to open up (its markets), we have to send a very clear signal” showing that there is “more resolve in America not to let other countries take advantage of us anymore.”

With broad control over trade policy, the Reagan Administration has turned down appeals for help against imports from several beleaguered industries, including those of copper, shoes and textiles.

If presidential tariff reductions are subjected to congressional votes, Yeutter contended, Congress would act “based on parochial and special-interest concerns rather than the broader national interest.”

He warned that curtailing the President’s trade powers would put Americans in danger of “shooting ourselves in the foot by provoking adverse effects on U.S. exports through retaliation or mirror legislation.”