Administration Gears for Battle Over Japanese Trade Policies

The Bush Administration geared up Friday for a major internal fight over how vigorously the United States should pursue its trade disputes with Japan, particularly in the wake of this week’s resignation of Japanese Prime Minister Noboru Takeshita.

Top Administration economic policy-makers are already sharply split over the issue, which must be decided by May 30, when the White House is required under the 1988 Omnibus Trade Act to “target” specific countries for possible retaliation over alleged unfair trade practices.

Commerce Secretary Robert A. Mosbacher and U.S. Trade Representative Carla A. Hills, pushing for a more aggressive approach, are urging that the Administration beef up its demands on Japan to open its markets to more U.S. products.

But Secretary of State James A. Baker III and Brent Scowcroft, President Bush’s national security adviser, have warned that “bashing” Japan while its government is in transition might turn the country inward and dash hopes for concessions later on agriculture and steel.

The battle lines firmed Friday as the Administration published its annual list of restrictions that other governments have imposed on American exports--the first step toward deciding which countries to target in the May 30 proceeding.

Meanwhile, separately the Administration formally cited Japan for failing to comply with parts of a four-year-old agreement with the United States that calls for Tokyo to open its markets to more American Made telecommunications products.

The decision, make buy the cabinet level Economic Policy Council Friday will require the White House to seek formal negotiations with Japan to correct the situation. If the two sides cannot reach agreement in six months, Washington could retaliate and block some Japanese imports here.

The 214-page inventory published Friday--known formally as the “National Trade Estimate Report”--covered barriers maintained by 34 countries and two trading blocs, including Japan, the European Community, South Korea, Taiwan and Brazil.

It omitted the trade restrictions that the United States itself maintains against such goods as beef, dairy products, textiles, sugar, autos, steel, machine tools, lumber, rubber footwear and ceramic tiles.

Wants More Purchases

In the May 30 exercise, there seems to be little question that the Administration will have to include Japan among the governments it will target for “priority” negotiations. Officials acknowledge that omitting Japan would cause a firestorm in Congress.

Mosbacher has been pushing for the Administration to make broad demands that Japan buy more high-tech products and open its distribution system, sources said.

But Baker, Scowcroft and chief White House economist Michael J. Boskin have been pressing for a more low-key approach, such as singling out specific laws and practices that might be easier politically for Japan to correct.

These officials point out that the United States needs Japanese investment and cooperation to help finance the U.S. budget deficit and keep the dollar from plunging on foreign exchange markets.

It also is counting on the Japanese to help finance part of Treasury Secretary Nicholas F. Brady’s plan for reducing Third World debt. And it wants Japan to support the U.S. agenda in global trade-liberalization talks now under way in Geneva.

The prospect that the Administration might “target” Japan, South Korea and Taiwan for possible retaliation over alleged unfair trade practices has set off lobbying efforts by all three countries to avoid such a designation next month.

Joshua Bolten, Hills’ general counsel, said that even the publication of the list of “target” governments on May 30 will not mean that the United States inevitably will retaliate against those countries, only that it will seek negotiations to resolve the dispute.

Similar to Prior Lists

If 18 months of negotiations prove fruitless, the Administration would be under pressure to retaliate, probably by restricting imports. Even so, last year’s trade law contains some loopholes that enable the President to avoid such action.

Friday’s listing of trade barriers appeared to be little different in substance from those of earlier years.

Most of the foreign trade barriers contained in Friday’s report are longstanding ones about which the United States has been complaining for years. In some cases--such as Japanese purchases of U.S. beef and citrus products--the document cites substantial improvement.

The report expressed new concern, however, over efforts by the Japanese government to exclude U.S. computer manufacturers from selling personal computers to Japanese schools by writing specifications that favor Japanese-made PC systems.

In virtually all cases, the report says the United States has informed the government concerned that it regards the individual trade barrier as unfair. In some instances, the foreign government already has begun taking steps to alter its practices.

TRADE BARRIERS AROUND THE WORLD

Here is a partial list of restrictions maintained by major U.S. trading partners:

JAPAN

Tariffs: Among world’s lowest at average 2%. Higher tariffs on tobacco, leather, wood, paper, aluminum

Quotas: rice, fish, feed grains

Restrictions on standards and certification: telecommunications, radios, medical devices, pharmaceuticals

Limits on government procurement: supercomputers

Patents, trademarks, copyrights: Slow registration procedures, inadequate enforcement

Other restrictions: Semiconductors, personal computers, optical fibers, auto parts, aerospace

KOREA

Tariffs: Average 12.7%, up to 50% on agricultural products. Also: soda ash, auto parts, telecommunications equipment, paper products

Quotas: Agricultural products, fish, beef

Restrictions on standards and certification: Food products, cosmetics, pharmaceuticals, medical equipment, telecommunications equipment, electrical products

Government procurement: Not a signatory to international code governing procurement. Key problem areas are telecommunications, electrical equipment, computers and data processing

Patents, trademarks, copyrights: Improved procedures in 1987; lax enforcement. Widespread piracy of equipment, recording and software

Other restrictions: Professional services, investment

TAIWAN

Tariffs: Average 12%, up to 50% on agricultural products

Quotas: Import licenses needed for agricultural products

Restrictions on standards and certification: Agricultural goods

Export subsidies: Rice and sugar exports

Patents, trademarks, copyrights: Inadequate patent laws, lax enforcement, widespread piracy of copyright and patented materials. Microorganisms, semiconductors not patentable

Other restrictions: Services; insurance companies under quota. Investment striuctly regulated. Tobacco and wine sales under government monopoly

BRAZIL

Tariffs: Average 37.4%, from recent 51%; top rate 85%, from 105%. New schedule to impose lower unified rates on all products

Quotas: Import licenses for all products, including finished goods, intermediate manufactures and food goods

Government procurement: Not a signatory to international code. Informal “buy national” polices at all governmental levels

Export subsidies: Processed agricultural products, manufactured goods

Patents, trademarks, copyrights: Chemical and pharmaceutical products and processes unprotected. Copyright at world standards, but enforcement lax

Other restrictions: All services severely restricted. Restrictions on data processing, telecommunications, motion pictures. Investments widely restricted. Computers, software, information networks. Aircraft

EUROPEAN COMMUNITY

Tariffs: Variable levies on food products, paper products, tobacco, trucks, textiles, aluminum, semiconductors, plywood

Quotas: Plywood; import licenses for apples

Government procurement: EC government agencies enforce “buy national” polices. A 50% EC content requirement on heavy electrical equipment

Export subsidies: Most agricutlural goods plus finished food goods such as pasta

Patents, trademarks, copyrights: Copyright enforcement problems in Greece, Italy, Spain, Portugal, Belgium, Holland. EC seeking harmonized system

Other restrictions: Oilseed production subsidies. Beef hormone import ban. Semiconductors, telecommunications under varying restrictions. Airbus production subsidies

Source: Office of the U.S. Trade Representative