U.S. May Not Cite Japan for Unfair Practices : Trade: Washington says several disputes have been resolved. But if Bush doesn’t act, it may set off a firestorm in Congress.

The Bush Administration is rapidly moving toward a decision not to cite Japan for alleged unfair trade practices this year--a move certain to spark a backlash in Congress, which enacted the 1988 Omnibus Trade Act expressly for that purpose.

The decision, described by key officials as all but made, is being held up pending final resolution by Tokyo of a number of narrower-interest trade disputes--primarily a 1989 case involving Japanese barriers to U.S. wood products.

Negotiations on the wood products issue are scheduled to resume in Tokyo this week. Although prospects for a settlement still are touch and go, U.S. negotiators are reasonably confident that Japan will make serious concessions.

If the lumber talks result in an accord, the decision not to cite Japan with a new round of trade cases is expected to be affirmed formally at a Cabinet meeting on Friday or next Monday. The move has the support of virtually all the Administration’s top economic policy-makers.

Moreover, U.S. officials say if the White House does not formally cite Japan this year, it probably will not launch any new unfair-trade-practices proceedings--even against India and Brazil, which were included with Japan on last year’s list.

Administration officials concede that if the decision is made as anticipated, it could create a firestorm in Congress, which has been growing increasingly resentful of what lawmakers perceive as Japanese intransigence.

Although Bush Administration officials hope to assuage legislators by citing concessions that Tokyo has made in the Structural Impediments Initiative--a broad economic pact that the White House just reached with Japan--they concede the risk of a backlash is high.

Sen. John C. Danforth (R-Mo.), one of the most outspoken trade hawks in Congress, recently wrote President Bush that failure to target Japan again would “seriously jeopardize” the credibility of U.S. trade policy.

Danforth also warned that “the executive branch may be falling into a pattern of sidestepping U.S. trade law” by seeking to avoid the retaliation that the 1988 trade act makes possible. The push within the Administration to avoid filing unfair-trade-practices cases this year--known to top policy-makers as the “zero option” proposal--reflects several factors:

Bush is known to feel strongly that the United States should give Japan a break because Japanese Prime Minister Toshiki Kaifu spent a lot of political capital pushing through major concessions for Washington in the SII talks that are just now ending.

U.S. officials believe that if the Administration does not cite Japan, it would look foolish launching unfair-trade-practices proceedings against smaller countries. The main reason it targeted Brazil and India last year was to avoid seeming to single out Japan alone.

Some policy-makers believe that the United States will risk losing support for broader U.S. trade goals in the Uruguay Round--the global trade-liberalization talks now going on in Geneva--if it again targets other countries as allegedly unfair traders.

Ironically, the White House has almost run out of potential unfair-trade-practices cases involving Japan. One possible candidate--Tokyo’s recalcitrance in granting a U.S. firm a patent for a high-tech metal alloy--was removed last week when Japan agreed to hold separate talks.

On another, involving Japanese refusal to protect U.S.-made sound recordings adequately from possible piracy, negotiators say Tokyo is on the verge of making significant concessions. A third, Japan’s refusal to buy U.S.-made auto parts, involves quality questions.

Although U.S. officials say the current dispute over wood products remains the primary obstacle to carrying out the zero option approach, they concede that they also are waiting to see how Tokyo handles the sound-recordings issue and a complaint over medical equipment.

According to Administration officials, the prime movers in pushing for the zero option strategy are Budget Director Richard G. Darman and White House National Security Adviser Brent Scowcroft. Only Commerce Secretary Robert A. Mosbacher wants to cite Japan.

Officials say the decision probably will be made directly by Bush.