Protectionist Policy Emerges in S. Korean Deal : Japan’s Textiles Limit Contradicts Claim on Imports

During his trip to the United States that ended Tuesday, Prime Minister Noboru Takeshita cited a spurt in imports by Japan last year as proof that his country is transforming itself into a new kind of economic animal--one intent on welcoming products from abroad.

But an ominous contradiction of that claim has emerged.

A dispute over imports of textiles from South Korea, once regarded as a key test of Takeshita’s pledge at the Toronto economic summit last summer to promote more imports from Japan’s Asian neighbors, has ended--with Japan failing the test.

After eight months of threats, culminating with the filing of an anti-dumping suit against Korean knitwear imports, Japan extracted an agreement from South Korea to limit exports of knitted sweaters to a 1% annual increase for three years, beginning this year. Korean manufacturers also agreed to set minimum prices on knitwear sold to Japan.

Criticized by Newspapers

The agreement consisted of a pledge by executives of South Korea’s textile industry to executives of Japan’s industry. In that form, it enabled Takeshita to keep unblemished Japan’s record as the only industrialized nation other than Switzerland that does not impose governmental textile import restrictions, even though they are of a type approved under a special General Agreement on Tariffs and Trade accord.

Both governments worked hard behind the scenes to hammer it out, and Japan’s minister of international trade and industry, Hiroshi Mitsuzaka, publicly said he “evaluated it highly.”

However, Japanese newspapers condemned the agreement.

The Asahi said in an editorial that Japan had forced the South Koreans to accept the “voluntary” restraints through threats--in much the same way that the United States had threatened Japan to bring about this country’s “voluntary” restrictions on exports of steel, machine tools, automobiles, textiles and other Japanese goods to the United States.

The precedent, the Asahi complained, could spur a host of other Japanese industries--cement and steel, in particular--to demand similar protection.

Indeed, Kagayaki Miyazaki, chairman of the Japan Knitting Industry Assn., declared openly that he “expected this agreement to become a model for other industries.”

But officials of the Ministry of International Trade and Industry said no other industry had made moves to emulate the textile makers. They also declared that the voluntary restrictions amounted to an extraordinary “emergency measure,” not a harbinger of the future.

The dispute did, in fact, serve to expose just how far Japan’s textile market had opened to imports, as well as to spotlight the great expansion of sales of South Korean products here.

Last year, Japanese trading companies, supermarkets and other importers purchased about 110 million sweaters and cardigans from foreign countries, mostly in Asia--or nine for every 10 men, women and children in the country. Japan has a population of 122.4 million.

Of the imported sweaters, about 63.5 million came from South Korea, according to the trade ministry. Imports in 1988 represented a 60% gain on top of a 62% upsurge in 1987.

Knitted sweaters from South Korea have been selling for between $15 and $30, while Japanese sweaters are priced from $39.

Overall textile imports rose 39% to $10.6 billion last year to become Japan’s second-biggest category of imports after oil and petroleum products. And in an industry in which Japan, until 1986, had consistently enjoyed a trade surplus dating back into the 19th Century, its deficit in manufactured textile trade rose to $3.1 billion.

Japan’s Ability in Doubt

The turnabout, nonetheless, represented just a small move in the direction of the U.S. example. With its $25 billion in textile imports, the United States still far outstrips Japan as the world’s No. 1 importer.

Analysts, however, were already expressing doubt that Japan would be able to halt the import surge.

Trading companies and supermarkets were reported shifting orders for sweaters to other Asian countries. South Korea, meanwhile, was expected to upgrade the quality and price of the sweaters it sells to Japan.

As a result, the effort to protect some 7,000 small Japanese textile firms, analysts said, is doomed as what one called a “mole-tapping” exercise--trying to dispose of moles by running from hole to hole and beating the animals, one by one, as they come out.