U.S. Sanctions of Japan Inevitable, Senator Says : Trade: Frank H. Murkowski said punishing the construction industry would have a ‘symbolic’ impact.

Sen. Frank H. Murkowski said Wednesday that he believes it inevitable that the United States will impose retaliatory sanctions against Japan in the simmering dispute over foreign access to Tokyo’s public works construction market.

Murkowski (R-Alaska) told reporters here that sanctions in the construction sector would have a “symbolic” impact and would encourage Japan to make concessions on a range of other trade issues under dispute.

“I think it will have to come to a 301 because of the way the system (in Japan) works,” Murkowski said, referring to Section 301 in the U.S. Trade Law, which provides for punitive sanctions. “They need something to come down to justify a reaction.”

Murkowski, co-chairman of the Senate Foreign Relations Committee’s subcommittee on East Asian and Pacific affairs, said some significant progress has been made in licensing and opening public works bidding to American construction companies since the issue emerged three years ago. But he complained that there has been no comparable access for U.S. architectural, engineering and design firms.

“The perception in the United States is one of inequity,” Murkowski said. “Our markets are open. Why aren’t yours?”

On the whole, Murkowski was upbeat about Japan’s progress in opening its construction market. As many as 17 major public works projects have been open to foreign bidding, and 13 U.S. construction companies have now obtained licenses here, obtaining about $65 million in contracts through joint venture arrangements, he said.

But that falls far short of the $2.4 billion in annual business claimed by Japanese contractors in the United States, he added.

Moreover, the two American design firms licensed in Japan have been unable to find joint venture partners here and therefore remain locked out, he said. The Japanese government and the construction industry should establish “ground rules” that would allow such firms to tie up with local partners, Murkowski said.

Last month, U.S. Trade Representative Carla A. Hills submitted a report to Congress criticizing the pervasiveness of dango, or collusive bidding, in Japan’s construction industry. The report said an arcane system of awarding public works contracts to insiders deprives American companies of competitive opportunities here.

Hills, however, chose not to recommend that trade sanctions be imposed at this time, recognizing that the Japanese side has made improvements in market access for foreign competitors.

Murkowski, who is visiting Tokyo for talks with Japanese government and construction industry officials, has been an outspoken advocate of a tougher line against Japan in the construction trade dispute.

He conceded Wednesday that he played a key role in prodding the Justice Department to seek about $35 million in punitive damages against a cartel of Japanese firms that the Japan Fair Trade Commission ruled had rigged bids on contracts at the U.S. Navy base in Yokosuka between 1984 and 1987.

“We raised hell with the Navy and went to the Justice Department and stirred the pot,” Murkowski said.

In an unprecedented move, a Justice Department lawyer visited Tokyo last month and threatened cartel members with legal action in the United States unless they paid damages in connection with the Yokosuka dango case.

Hours before Hills announced her findings in Washington on Nov. 22, leading companies in the cartel agreed to pay about $32 million in an out-of-court settlement. Murkowski said the firms feared being cut off from future Pentagon contracts, as well as facing litigation under U.S. antitrust law.