Target Japan for Trade Sanctions, Senators Warn : Put Nation on List or Face Political Backlash in U.S., Panel Tells Administration

Congress warned the White House on Wednesday that the Administration had better include Japan among the countries that it targets for possible retaliation over alleged unfair trade practices later this month or it will face a serious political backlash at home.

At a hearing of the Senate Finance Committee, lawmakers told U.S. Trade Representative Carla A. Hills that failure to put Tokyo on the target list would intensify protectionist sentiment in Congress and make trade the major issue in the next presidential election.

“If Japan is not on the list, it seems to me that the trade bill (that Congress enacted last year) has been dropped in the ash can,” Sen. Donald W. Riegle Jr. (D-Mich.) admonished, reflecting a view that clearly is shared by an overwhelming majority of the panel.

Sen. John Heinz (R-Pa.) was even more direct: “The American people do not want business as usual; they are tired of excuses.” He warned that unless the government gets a response to trade complaints, “I can see trade being the issue in the 1992 election.”

The hourlong session marked the most bluntly worded warning that the lawmakers have issued so far in demanding that the Administration include Japan on the list of “priority” fair trade violators that is to be published later this month.

The listing, required by the Omnibus Trade Act that Congress passed last year, gives the countries six months to two years to satisfy Washington’s demands that they drop their trade barriers. If they do not, they will face U.S. retaliation.

With the May 30 deadline for compilation of the list approaching, foreign trade officials have begun lobbying the Administration to omit their countries from the list. Besides Japan, the Administration is considering appeals from South Korea, Taiwan, Brazil, members of the European Community and others.

Hills declined, as expected, to say specifically whether the Administration ultimately would place Japan on the list. But she pledged that she will use the provisions in the new trade act “energetically” and that she will “not hesitate to take selective unilateral actions.”

Must Boost Savings

In her testimony Wednesday, Hills noted repeatedly that although U.S. exporters face some serious trade barriers, the bulk of the U.S. trade deficit stems from America’s own economic shortcomings, particularly the fact that the United States consumes more than it produces.

She said that to bring the trade deficit down significantly, the United States must reduce the federal budget deficit and boost the nation’s total savings to provide enough money to finance needed new investment.

“We could open all the markets . . . and it still wouldn’t eliminate the trade deficit,” Hills said. She also noted that some 20% of the goods that foreigners want to sell in the United States are restricted by U.S. trade barriers.

The intensity of the views expressed by senators Wednesday reflected growing resentment on Capitol Hill over perceptions that Japan is continuing to balk at opening its markets to more U.S. goods. The U.S. trade deficit with Japan last year was $52.1 billion and is projected to be $50.1 billion in 1989.

Several lawmakers have called for the Administration to abandon its traditional free trade philosophy in its dealings with Japan and to pursue a new so-called managed trade approach that would demand a specific share of the Japanese market for U.S. goods.

The Administration itself has split over drafting a new U.S. policy toward Japan. Commerce Secretary Robert A. Mosbacher has been pushing for a new, tougher line, while other presidential economic advisers have been warning that such a policy could set off a trade war.

The developments came as, separately, the House Foreign Affairs Committee began hearings on the revised U.S. agreement with Japan for joint production of the proposed FSX advanced fighter aircraft, with a view toward deciding whether Congress should seek to block the accord.

Needs New Fighter

In Wednesday’s testimony, Mosbacher and Defense Secretary Dick Cheney assured the panel that the agreement would prove to be in U.S. commercial and strategic interests and that it would not give Japan the wherewithal to compete against U.S. aircraft makers, as critics have charged.

Cheney also sought to challenge contentions that Japan should have bought U.S.-made F-16 fighters “off the shelf” rather than developing a new fighter. He said Japan’s security needs dictate that any new fighter be produced at home, much as U.S. practice requires.

And he noted that no other major industrial country--including West Germany, Britain and France--buys fighter aircraft that are made outside its borders. The alternative to the FSX deal was not for Japan to buy the F-16, Cheney said. “It was for Japan to go it alone.”

The Administration faces two weeks of hearings over the FSX issue before Congress finally makes a decision on the deal.

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