U.S. to Prod Japan on Reforms in New Round of Trade Talks

The United States and Japan begin a major new round of trade negotiations Monday in the face of fresh warnings from Washington that the talks must “produce results” soon or pressure for tough U.S. retaliation will rise.

The negotiations, to be held in Tokyo, are designed to prod Japan into accelerating reforms in its economy and in the Japanese way of doing business, and eventually to spur more purchases of foreign imports, particularly from the United States.

The talks constitute the Bush Administration’s most far-reaching initiative to help open the Japanese market to more American goods. They will be followed by a separate round of lower-level negotiations in Hawaii on U.S. complaints about specific trade problems.

Although this week’s meetings are only the opening session, Washington has made clear it wants the talks to produce results soon. U.S. officials hope for decisions by early next spring, when the White House must decide whether to impose sanctions on Japan.

President Bush warned Japanese Prime Minister Toshiki Kaifu during Kaifu’s visit here Thursday and Friday that the negotiations must result in significant changes by April or the Administration will be under intense pressure to retaliate against Japan.

Although Kaifu made no commitments, U.S. officials say that Japanese officials appear to be taking the negotiations seriously. The effort, known as the Structural Impediments Initiative, or SII, involves subcabinet-level officials from all the major economic agencies of both governments.

The Bush Administration proposed the talks last May, in part to provide a forum for more constructive negotiations on trade while it carried out the requirements of the Omnibus Trade Act that Congress passed last year and formally cited Japan for alleged unfair trade practices involving satellites, supercomputers and lumber.

Japan has vigorously protested being cited under the trade law, even refusing to negotiate under its aegis--although top Japanese trade officials are discussing the three specified issues as part of other trade talks, such as ones that will be held in Hawaii later this week.

But the SII, as it has been dubbed informally, involves far broader issues, and for the first time is “two-way” in scope--meaning that Japan also is getting to make demands for steps that it believes the United States should take to help reduce America’s trade deficit.

The negotiations are expected to continue for a year or more, with Washington pressing for the two sides to issue an “interim” report next spring that could help mollify Congress’ increasing impatience with what it perceives as Japanese intransigence on the trade issue.

Bush Administration officials conceded in the wake of Kaifu’s visit here last week that Tokyo probably would not be able to move rapidly as long as it has an interim government--and may not be in position to do so even after the coming election unless Kaifu and the ruling Liberal Democratic Party retain a significant majority in the lower house of Parliament.

Nevertheless, the United States is planning to keep the pressure up in hopes that it can generate momentum for change. Both Bush and Secretary of State James A. Baker III warned Kaifu this past week that the United States will not back away from its demands.

In all, the United States has listed six major areas in which it will press Japan for change:

Washington wants Tokyo to alter its current policies to encourage individuals and corporations in Japan to save less and consume more; to open up more farmland for general use; and to enforce antitrust laws so as to crack down on bid-rigging by big corporations, which is a tradition in Japan.

The United States also wants the Japanese to break up the archaic product distribution system that analysts say makes it difficult to market imports in the country; to end pricing advantages for domestic goods, and to ban exclusionary business practices.

The Japanese have signaled that they plan to push the United States to reduce its budget deficit more rapidly and to take a variety of steps to help spur more saving and investment, expand production capacity, and improve education and research-and-development.

They also will suggest changes in America’s business practices, such as prodding firms to concentrate on medium- and long-run planning rather than short-term profits; better quality control and a curb on leveraged buyouts.

KEY POINTS AT TRADE TALKS What the United States wants from Japan:

* Greater individual and corporate consumption; less saving.

* A policy to open more farmland for general use.

* A crackdown on bid-rigging by big corporations.

* An end to barriers to distribution of U.S. exports.

* An end to price advantages for domestic goods.

What Japan wants from the United States:

Swifter reduction in the budget deficit.

* More corporate and individual savings, investment.

* Expanded production capacity; better quality products.

* Better education; more research and development.

* Business focus on long-term planning, not short-term profits.

Source: Los Angeles Times