Bush Hits Fears of Foreign Investing : Says Discouraging Japanese Would Undermine Efforts to Finance Deficit

President Bush warned Americans on Tuesday not to get “so concerned about foreign ownership” that they discourage the Japanese from buying U.S. securities--a move he said would “undermine” U.S. efforts to finance the budget deficit.

During a press conference a day before he is to leave for a visit to Japan and the Far East, Bush tersely reminded a questioner that “we have horrendous deficits” and that “foreign capital joins domestic capital in financing those deficits.”

When asked what he would do to “reassure” Americans nervous about Japan’s growing economic power, Bush replied: “I tell them, don’t get so concerned over foreign ownership that you undermine the securities markets in this country.”

The President’s remarks, his most blunt so far on the foreign ownership issue, reflect the increasing difficulty that the Administration faces in handling the nation’s huge deficits while dampening fears that Japan--a leading foreign investor in the United States--is “taking over” American industry and real estate by increasing its investments here.

Takeshita Notice

Those concerns were inflamed recently when Japanese Prime Minister Noboru Takeshita, in a meeting in Washington with Bush earlier this month, served notice that Tokyo, by virtue of its growing economic power, wants to play a broader role in international affairs and receive greater consideration in U.S. foreign policy actions.

Contending that the United States must play closer attention to the growing foreign financial stake in this country, Rep. John Bryant (D-Tex.) has introduced a bill that would require foreigners who buy U.S. assets to register their purchases.

Critics say that the measure--which would force foreigners to provide extensive information about their businesses--would discourage needed investment. Bush opposes the bill, and five Cabinet officers warned Congress last week that they would recommend a veto if the legislation is sent to the White House.

House Speaker Jim Wright (D-Tex.) had scheduled the Bryant proposal for floor action this week, primarily to hurl a political salvo at the President. At Bush’s request, however, Wright has taken the proposal off the House agenda until the President returns from Asia.

Currently, foreigners hold about 12% to 13% of the total public debt in the United States, and the Japanese share of new borrowing has been increasing markedly in recent years. The government must sell a sizable portion of government securities to foreigners each year so it can borrow what it needs to operate without raising interest rates here more sharply.

“It is important, if we believe in open markets here, that people be allowed to invest here,” Bush said in the press conference.

Third-Largest Investor

He also pointed out that despite widespread perceptions that Japanese investors are taking over U.S. industry and real estate, the Japanese actually are the third-largest holder of investment in the United States--after the United Kingdom and the Netherlands.

According to a General Accounting Office survey issued in October, Britain holds $75 billion, or 29%, of the $252 billion in foreign investment in manufacturing and real estate in the United States; the Netherlands holds $47 billion, or almost 20%, and Japan holds $33.4 billion, or 12.7%. Canada, the next on the list, holds $21.3 billion, or 8.3%.

Meanwhile, the Administration announced Tuesday that it will seek to open negotiations with the European Community and South Korea aimed at reducing their barriers to trade in telecommunications products. But officials conceded that any talks are apt to continue for years.

The move was mandated by last year’s massive trade reform legislation, which requires the Administration to designate “priority” targets for such talks and to impose trade sanctions on those countries if they decline to open their markets to more U.S. products.

But the law allows for the negotiations to continue for up to three years before any sanctions must be imposed--provided progress is being made--and the Administration has signaled that it is not in any hurry about pushing the talks to a conclusion.

The announcement, contained in a new Administration report, came after South Korean officials failed in an attempt to negotiate their way off the list. Korean trade officials offered some concessions on telecommunications trade in talks here late last week, but U.S. authorities rejected them as inadequate.

The document cited both the European Community and South Korea for a wide array of trade barriers, ranging from restrictions on imports to government procurement practices, investment barriers and the setting of restrictive product standards.

The report did not cite Japan because the United States already has several accords with Japan that are designed to open Japanese markets to more U.S. telecommunications goods. Instead, the office of Trade Representative Carla Anderson Hills pledged to monitor those agreements more closely.

There was no comment from members of Congress, who had inserted the requirement for a report in last year’s trade bill. Some staff members said that it seemed clear the Administration wants to comply with the letter of the law. The entire report was six pages.

Separately, in Geneva, the United States declined Tuesday to block Brazil from launching proceedings in the Geneva-based General Agreement on Tariffs and Trade on a dispute over patents. Brazil intends to protest sanctions that the United States imposed in retaliation for Brazil’s refusal to protect American pharmaceutical patents.

But the U.S. trade representative’s office issued a strong statement deploring the Brazilian trade barriers. Washington’s move in allowing the Brazilians to protest in GATT was part of a strategy to strengthen GATT jurisdiction over intellectual property.

In a related development, Hills’ office announced that the Canada-U.S. Trade Commission, which is responsible for overseeing the U.S.-Canadian Free Trade Agreement signed last year, will convene its first meeting on March 13 in Washington. The session is being billed as organizational.