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Japan Discount Rate Up; U.S. Dollas Keeps Rising : America Faces Heat From Major Trading Partners at High-Level Conference

Times Staff Writer

The Bush Administration appears to be heading into a barrage of criticism from its major economic allies over its decision to threaten Japan and other countries with possible retaliation if they do not eliminate trade barriers that the United States calls “unfair.”

The assault is expected to come this week at the annual ministerial-level meeting of the Paris-based Organization for Economic Cooperation and Development, a forum of industrialized countries. The 24-country session begins today.

The prospect of a strong backlash over the new U.S. trade actions came as Japan’s trade minister, Hiroshi Mitsuzuka, met informally Tuesday with U.S. Trade Representative Carla A. Hills to repeat his earlier assertion that Japan “has no intention of negotiating” with the United States “in the context of” the retaliation that Washington has threatened under the 1988 Omnibus Trade Act.

Meetings Scheduled

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Later this week, Cabinet-level officials from Japan and Western Europe are expected to push through strong language chiding the United States in the formal communique that the ministers will issue at the end of their annual spring meeting. The document has no force of law, but the criticism would amount to a diplomatic rebuke of the United States’ new, more aggressive trade stance.

Meanwhile, Treasury Secretary Nicholas F. Brady, Hills and several other high-level U.S. officials are scheduled to meet with their Japanese counterparts here today to discuss a separate U.S. proposal to engage Japan in wide-ranging talks aimed at dealing with structural impediments to freer trade in both countries. Today’s meeting will be the first time that the two sides have gotten together since the United States announced its trade actions last week.

The United States hopes that the broad talks it has proposed--suggested by Brady--would deal with such issues as the closed nature of Japan’s product-distribution system, the inability of Americans to save what they need to invest in new plants and equipment and ways to coordinate broad economic policies. These are factors that many economists believe lie at the heart of the trade imbalance between the two countries.

It was not immediately clear whether Japan will agree to hold such talks, at least until its government gets over its annoyance at being accused publicly of employing “unfair” trading practices. Besides Japan, the United States last week also cited Brazil and India for maintaining allegedly unfair trade barriers.

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The United States also is expected to run into conflicts with West Germany and Japan over Washington’s push to persuade those countries to take new measures to help speed up the improvement in the U.S. trade deficit. The Bush Administration wants them to spur more domestic demand--which it hopes would lead to increased buying of U.S. exports.

But both countries, along with Britain, contend that they cannot act right now because inflationary pressures are mounting at home and would be heightened further if authorities took new steps to increase domestic demand. U.S. officials concede that there is little support among other OECD members for the U.S. position.

On Tuesday, Hills began what is expected to be a concerted U.S. effort to deflect criticism of the Administration’s new trade moves, saying at a news conference attended mainly by European reporters that Washington has said only that it wants to negotiate with Japan, India and Brazil and has not yet retaliated.

Strict Rules Blamed

“I am an undying optimist by nature, and I believe that we will have some fruitful discussions,” she said at one point.

The U.S. trade complaints against Japan, announced by the Administration last Thursday, cited Tokyo on three counts: stringent government procurement regulations that prohibit the purchase of U.S.-made supercomputers; similar restrictions on buying American-produced satellites, and excessively strict lumber standards that effectively bar the import of American forest products.

Washington has also cited Japan for refusing to open its telecommunications channels to foreign producers of cellular telephones and mobile radios. The United States has also launched proceedings against Brazil, for restricting import and export licenses to keep foreign goods out, and against India, for restricting foreign investment and sales of insurance policies by foreign underwriters.

Several U.S. trading partners, including Japan and the European Community, contend that the U.S. action is illegal under international trade rules and have threatened to challenge such U.S. “unilateralism” under the Geneva-based General Agreement on Tariffs and Trade, the 96-country compact that administers global trading laws.

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Under international rules, countries having trade disputes with other governments are expected to take their complaints to GATT. The U.S. law was passed by Congress last year as part of an effort to require the Administration to “get tough” on accused trade violators.

For all the apparent backlash over last week’s U.S. action, the cases the Administration used in citing Japan actually were relatively mild ones that U.S. authorities thought could be resolved easily. Bush’s own national security advisers were against hitting Japan too hard for fear of weakening the U.S.-Japanese political alliance.

Along with the other issues, this week’s ministerial-level meeting of OECD countries is expected to provide added political impetus to the Third World debt-reduction plan that Brady proposed earlier this year and the Uruguay Round of global trade-liberalization talks now under way in Geneva.

The ministers also are expected to issue a statement bolstering earlier calls by their governments for concerted action to deal with urgent environmental matters--from global warming to problems with holes in the earth’s ozone layer.


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