Verity Heads for Japan, Carries a Stern Warning on ‘Dumping’

New Commerce Secretary C. William Verity, leaving on his first official trip abroad, said Tuesday that he will warn Japanese officials about artificially low prices on exports to the United States and stress the possibility of retaliatory duties against companies involved in product “dumping.”

The commerce secretary, speaking before his departure for a weeklong visit to Japan, summed up his mission in one sentence: “The relationship is increasingly soured by one bad apple: trade.”

The U.S. trade deficit reached $156 billion last year and appears to be heading even higher this year. Last year, Japan’s trading surplus with the rest of the world was $82.7 billion, and its surplus with the United States alone was $51.4 billion--imbalances that economists believe are unbearable and subject to painful correction.

“The economic system--the markets--will react to bring trade into balance, in some cases precipitously, as we have recently seen on Wall Street and other stock markets,” Verity told a breakfast meeting of the U.S. Chamber of Commerce here.

“I am a great admirer of the marketplace, but I am mindful of the fact that the invisible hand under these circumstances could inflict a great deal of unnecessary pain in correcting the trade deficit for us. Japan is at risk to receive a disproportionate share of the pain,” he warned.

Verity said he will tell Japanese officials that the Administration’s policy of relying heavily on a weaker dollar to shrink the huge U.S. trade deficit is being undermined by what he called Japan’s intentional failure “to price in line with the appreciated yen, in order to maintain market share.”

In urging the Japanese to take gradual steps to scale down their reliance on the United States as the main market for their goods, Verity said he would focus on several specific areas:

- Japan must correct pricing policies that “are distorting the economic and trade effects of currency markets.” By refusing to raise prices to put them more in line with a depreciated dollar, Japanese firms “are running the risk that additional anti-dumping cases will be brought against them in response.” Under U.S. laws, “dumping” is an illegal underpricing of goods below market, a practice that can be punished by duties equal to the amount that the goods are underpriced.

- Japan must open its markets to U.S. goods and services far more than has been achieved in several years of bilateral negotiations in several areas, such as electronics, telecommunications, pharmaceuticals and government procurement.

- Japan must speed up its declared intention to restructure its economy “away from the current export-driven growth and towards growth based upon expanding domestic demand.”

“Failure to stimulate the Japanese economy through domestic consumer-based demand runs the real risk of recession. As the United States lessens our demand for foreign products, the Japanese economy must substitute domestic demand for the export-led growth they have enjoyed in recent years,” Verity said.

Replying to questions, he cautiously sidestepped any position on the apparent disarray within the Administration over whether the dollar should decline further.

“If there’s one thing I’ve learned, it’s not to answer questions” on the dollar, he said, noting that only President Reagan and Treasury Secretary James A. Baker III are authorized to declare policy on the currency.

Verity was sworn in Oct. 19 to succeed Malcolm Baldrige as commerce secretary. Baldrige was killed in a horseback riding accident last July 25.