U.S., Japan Construction Talks Fail : President’s Next Step May Be to Impose Punitive Tariffs

A week of talks between U.S. and Japanese officials over participation by U.S. firms in billions of dollars worth of Japanese building projects ended in failure Tuesday.

And, a U.S. official, who spoke on condition of anonymity, said President Reagan had the authority to retaliate against Japan for what are considered unfair trade practices.

“That is one of the options,” the official said, adding that the Reagan Administration will decide probably by the end of next week what its next step will be.

“We exhausted our current capacity to resolve the outstanding issues and are not prepared to schedule any further discussions,” the unidentified source said.

If Reagan takes action and an investigation finds Japan guilty of unfair trade practices, as seems likely, the President could impose punitive tariffs on Japanese exports.

Japanese construction firms did an estimated $3 billion worth of construction work in the United States, while U.S. and other foreign firms do only minimal work in Japan.

U.S. and Japanese negotiators have met on the issue for two years. The current round of talks lasted a week.

Both Prime Minister Noboru Takeshita and his predecessor, Yasuhiro Nakasone, had pledged to drop the barriers to foreign construction firms, but their negotiators could not meet the U.S. demands.

The U.S. delegation was led by J. Michael Farren, deputy undersecretary of Commerce for international trade.

The Japanese group was headed by Peter Sato, director general of economic affairs in the Japanese Foreign Ministry.

Farren has criticized previous Japanese proposals as offering American companies only limited experience, not enough to enable them to take part in normal Japanese bidding on public projects.

“They (the Japanese) have not shown any flexibility,” the source said.

Japan had claimed that U.S. firms did not have the experience needed to work in Japan but agreed to permit them to work in seven special projects to win a “track record.”

But the Administration source, who was closely involved in the talks, said the projects were not large and limited the U.S. participation to such work as building roads.

He explained that one project was the Haneda expansion of the Tokyo International Airport.

The source said U.S. firms would be allowed to bid to build roads and runways--moving dirt and laying concrete, he called it--but excluded from design and engineering and building the expensive terminal.

He said the other six projects were similar and did not allow U.S. construction firms to use much of their expertise.

The source also said Japan refused to alter many of its bidding procedures, which included giving firms only 10 to 14 days between the time bidding opened until the time detailed bids had to be submitted.

He said the bidding procedure was like a “black box” to which Japanese firms, and no others, had the key.

The source said the Japanese firms were often in on writing the specifications for project and so were able to put together bids in a short time.

Normally, action to press an unfair trade complaint takes up to year, but the source said this case could take far less because of the extensive U.S. investigation already conducted in connection with the negotiations.

There was no indication of what action Reagan might take.

Japanese construction firms are already barred from work on projects that use U.S. funds under a law passed last year.

The law was first invoked last week, when the Washington transit authority rejected a bid from a consortium of U.S. and Japanese firms for work on a subway station.