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Japan Fears U.S. May Shift to Policy of Managed Trade

From Reuters

American efforts to craft a new trade policy are raising fears in Japan that Washington increasingly favors the idea of managed trade, with market share as the focal point of negotiations.

Japanese officials say they are counting on Washington’s traditional commitment to free trade to hold the line against managed trade, which attempts to guarantee U.S. industries specific market shares overseas through government-to-government agreements.

“The Bush Administration, I believe, is opposed to such an approach,” Kiyoaki Kikuchi, former Japanese ambassador to the United Nations told a conference in Sendai, northern Japan, this week. “But I am afraid controlled, managed trade is likely to emerge in the United States,” he said.

Kikuchi complained that the United States is heading toward a policy that has earned Japan endless criticism.

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“Japan has been criticized in the OECD (Organization for Economic Cooperation and Development) for targeting industries. Now the U.S. is trying to do what we have been criticized for over the past decade,” he said.

Publicly, Japanese trade officials downplay the threat.

"(U.S. Trade Representative Carla) Hills is emphasizing free trade, not closing markets,” said Hidehiko Nishiyama, deputy director of the Ministry of International Trade and Industry’s Americas and Oceania division.

Worrisome Signs

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“Managed trade would be a difficult policy for the U.S. to adopt. We are not seriously worried that they will adopt it, but we want to caution them against it,” Nishiyama said.

But privately, some in government said they see worrisome signs that support for a managed trade policy may be gathering steam due to growing U.S. frustration over American firms’ inability to boost sales here despite the removal of visible barriers to imports.

“Now there is talk that if U.S. industry has a certain share in Europe, it ought to have the same share here if the market were truly open,” a Japanese government source said. “The idea would be to make that share the target of negotiations,” he said.

One indication of growing U.S. support for a new policy came in a recent report by a private sector advisory committee advocating wider use of negotiated market-share targets with Japan. Hills has said she is reviewing the report carefully.

“The notion of managed trade was around in some circles under the Reagan Administration, but this report is the first time it has taken on an official, public form,” the Japanese government source said.

Recent American expressions of dissatisfaction over Japan’s alleged failure to honor a 1986 pact on microchip trade are also prompting concern that targetting market share could emerge as a more prominent pillar of U.S. trade policy.

Deny Making Promise

Hills said Tuesday that in her opinion, Japan committed itself in a 1986 agreement to allow American semiconductor sales eventually to take 20% of the Japanese market.

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Japanese government and industry officials have reiterated their stance that Tokyo never promised U.S. chip makers any specific market share, either in the 1986 pact or in a secret side letter. But some here fear Washington’s renewed attention to the issue--long a topic of dispute--may signal a broader policy drift.

“America is targetting industries it believes are competitive,” former ambassador Kikuchi said.

U.S. officials and trade analysts said that while the notion of targeting market share is gaining popularity in Washington, the debate is by no means over.

“With the new Administration, there is more willingness to talk in terms of share in general,” said one U.S. trade expert. “The targetting idea was anathema to the previous Administration because it smacks of managed, not free, trade.”

Greater attention to market share has also in part been dictated by the terms of the 1988 omnibus trade law, the trade expert said. “The wording of the law makes it possible to look at market share as an indicator of openness,” he said.


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