Another Trade Dilemma With Japan : Pacific Rim: Recent concessions make it difficult to target Tokyo again for allegedly unfair trade practices.

The Bush Administration on Wednesday moved another step toward resolving a thorny political problem heightened by its recent success in trade talks with Japan--whether to target Tokyo a second time for employing allegedly unfair trade practices.

The Administration turned down a request by Allied Signal Inc. of Morristown, N.J., that it initiate unfair-trade-practices proceedings against Japan for allegedly blocking the U.S. firm from selling a new high-tech alloy to Japanese power companies.

Instead, the two governments have agreed to begin negotiations immediately in an effort to resolve the Allied Signal dispute within 150 days. Unless Tokyo reneges, Japan will be spared the embarrassment of formal finger-pointing by the United States.

Although Wednesday’s decision was narrow in scope, U.S. officials said it underscores a broader problem that the White House is facing in its diplomatic relations with Japan.

Barely two weeks after cajoling Tokyo into making significant trade concessions, President Bush is nearing an April 30 deadline in the 1988 Trade Act requiring that he launch unfair trade practices proceedings against the most egregious foreign trade barriers now in force.

Once the Administration launches such proceedings, it has a year to persuade the offending government to relax its trade barriers. After that, the White House is under pressure to “retaliate” by imposing sanctions to restrict the country’s imports here.

A year ago, the Administration had little choice: Tokyo had seemed recalcitrant, and congressional pressure to do something to hit Japan was intense. Bush picked three narrow issues and launched broader economic and trade talks as well.

Two weeks ago, Japan finally responded--with sizable concessions--after a turbulent internal debate in which Japanese Prime Minister Toshiki Kaifu bucked serious political opposition to come up with a package that Washington would find credible.

As a result, the Administration finds itself in a quandary: Now that Japan has moved so far in the 1989-90 talks, if Bush launches a second round of negotiations he could damage Kaifu’s political future--and possibly spur a backlash among Japanese voters.

At the same time, if he omits Japan entirely from the list of trade offenders, he could run into heavy criticism from lawmakers. Congress has been slow to absorb the significance of Japan’s new concessions and is still demanding that the White House slap Japan again.

Sen. John C. Danforth (R-Mo.), one of the most outspoken trade hawks in Congress, wrote Bush that failure to target Japan again would “seriously jeopardize” the credibility of U.S. trade policy. “Mr. President, you must not let this happen,” Danforth said.

Bush’s own advisers are sharply split over the issue. Secretary of State James A. Baker III and chief White House economist Michael J. Boskin have argued that Japan has done enough this year and should not be singled out again in what amounts to an international scofflaw.

But Commerce Secretary Robert A. Mosbacher is expected to press for citing Japan again, both to avoid raising hackles in Congress and to keep up the pressure on Tokyo to make additional reforms.

Until Wednesday, the Administration had two potential candidates for launching new unfair trade practices cases against Japan--the Allied Signal petition and a complaint by U.S. record makers that Tokyo is not adequately protecting them against copying.

Washington also is considering a charge by manufacturers of medical equipment that Japan has erected unfair barriers to U.S. suppliers in that field.

But Wednesday’s decision removes the high-tech alloy issue from that pool, and U.S. officials said Japan already has offered privately to negotiate over the sound recordings problem. The complaint involving medical equipment also is likely to be worked out in talks.

For now, the Administration is in a wait-and-see posture. Washington wants to use the leverage it has before the April 30 deadline to make sure that Tokyo moves ahead in resolving these “new” issues and fulfills its promises from the broader talks just completed.

Particularly important to the Administration is a remaining complaint from last year involving Japanese impediments to the sale of U.S.-milled lumber products. Tokyo has promised to offer a solution to the problem, but the going so far has been slow.

Insiders say U.S. Trade Representative Carla A. Hills has indicated that if these outstanding issues are cleared up credibly, she also will recommend not citing Japan with new unfair trade practices complaints, even if doing so risks congressional ire.