‘Nothing New’ : Japanese Construction Proposal Disappoints U.S.

Hopes for progress in opening Japan to U.S. construction firms diminished on Wednesday as industry and Reagan Administration officials evaluated Japan’s latest proposal, which they said offered virtually nothing new.

While President Reagan and Prime Minister Noboru Takeshita met on Wednesday, Commerce Department officials studied a proposal submitted by Japanese officials in Washington on Monday night.

The typed, double-spaced, 1 1/2-page document was a vaguely stated proposal by the Japanese government to facilitate the ability of foreign firms to bid on a certain number of public works projects, according to U.S. officials who asked not to be identified.

“There was nothing new in this proposal,” said one official, who added that Commerce Secretary C. William Verity considered its content “barely sufficient to serve as a basis of further negotiations.” U.S. officials were drafting a critical response to the proposal late Wednesday.

Initial reports had raised the expectations that Japan was now willing to make it easier for U.S. construction firms to gain access to the lucrative Japanese public works market. Last month, Japan quietly had sent a mission of two officials to Washington with an informal offer to allow U.S. firms to participate in five or six public works projects in Japan.

A U.S. official said “we bit at it,” but Monday’s proposal “had less substance than the talks.”

Japan’s unwillingness to allow U.S. firms to bid on the $8-billion Kansai International Airport project led to a breakdown of U.S.-Japan talks in November and has since escalated into an increasingly thorny trade issue.

Japan’s latest proposal was deemed a move to exempt its construction firms from the newly enacted U.S. law banning companies from countries with closed markets from participating in federally funded public works projects.

sh U.S. Firms Criticized

“A large part of Japanese strategy is to delay and negotiate,” said Mark G. Chalpin, a spokesman for International Engineering and Construction Industries Council in Washington, an international trade coalition representing the U.S. architectural, engineering and construction industries. “Every day they delay and negotiate, then the status quo remains and they increase their penetration of the U.S. market while taking advantage of their closed market.”

Meanwhile in Tokyo, Hajime Sako, chairman of the Japan Federation of Construction Contractors, criticized U.S. firms for not learning how to gain access to the Japanese market. “American firms are quite hesitant to go into overseas markets unless they can realize a profit in a short period of time,” he said.

To date, only five foreign construction firms have been granted licenses by the Japanese government. They include two U.S. firms, Pacific Architects & Engineers of Los Angeles, which received a license several years ago for U.S. military construction, and San Francisco-based Bechtel Group Inc., which received a license last September--two years after its application and with the help of U.S. government pressure.

Meanwhile, Fluor Corp. of Irvine announced that it had signed a cooperation agreement with Ohbayashi Corp. to enter bids on major construction projects in both the United States and Japan.

Chalpin says no U.S. construction firm has received a major contract in Japan since 1965. In contrast, the Japanese did about $2 billion worth of construction work in the United States in 1986, “while U.S. firms billed one Mrs. Fields’ cookie stand in Japan,” he said. “The Japanese love to say we’re not trying hard enough to get business in Japan. But that is the way it is for the West Germans, Canadians, Koreans and others.”

Japanese construction firms are estimated to have chalked up another $2.5 billion in U.S. contracts in 1987, according to Chuck Pinyan, chief editor at International Construction Week, a McGraw-Hill Inc. industry newsletter. Before 1980, Japanese construction activity was minimal and not measured.

Made Law Meaningless

Most of the U.S. contracts have been for private developments. Only about 10% of that total business is in U.S. public works contracts, including a tunnel for the Washington Metro subway system and a Corps of Engineers dam project in Oregon. “The whole public works (portion) is a very small part of what Japanese have won here,” Pinyan said. Thus, industry observers believe, the U.S. law banning further participation in federal projects is meaningless.

He added that the Japanese presented Secretary Verity with reports last November that U.S. firms received several million dollars’ worth of construction contracts. Pinyan said those contracts were for equipment and supplies like elevators and trash compactors--not actual construction work.