Congress Blasts Bush’s Refusal to Target Japan Again on Trade : Pacific Rim: The Administration is convinced that Tokyo has gone out of its way to meet U.S. demands.

The Bush Administration ran into a firestorm of criticism in Congress on Wednesday over indications that it is planning not to cite Japan for alleged unfair trade practices this year under the 1988 Omnibus Trade Act.

During a Senate Finance Committee hearing, panel members warned repeatedly that failure to use the 1988 law as a cudgel could spark a crisis between Congress and the Administration and might spur lawmakers to enact new, even tougher trade legislation.

They also raised the possibility that Congress might reject any new trade agreements that the Administration might propose, such as those involving the Soviet Union and Eastern Europe or resulting from the Uruguay Round global trade liberalization talks in Geneva.

But U.S. Trade Representative Carla A. Hills argued before the committee that the Administration could get farther in its current trade negotiations if it did not formally target Japan or other countries.

Hills said the Administration already has made “significant” progress in talks with Japan under the Structural Impediments Initiative negotiations now in progress. “You have to give me a little leeway to decide what tools to use,” she said.

The harsh reaction from the Finance Committee appeared to signal a possible backlash from Congress if the White House, as expected, does not launch a new round of unfair trading practices cases against Japan, but key Administration officials said they would not be dissuaded.

The Cabinet-level Economic Policy Council is scheduled to discuss the issue today and make recommendations to President Bush. A final decision on whether to cite Japan, which was accused of unfair trade practices last year, could come today or Friday.

The Administration’s reluctance is based on a conviction that Tokyo has gone out of its way to meet U.S. demands on a variety of trade issues, including promising sweeping reforms as part of the Structural Impediments Initiative negotiations.

White House strategists said Bush believes that Japanese Prime Minister Toshiki Kaifu spent a lot of political capital pushing through major trade concessions for Washington in the SII talks and that Japan deserves a break from continual U.S. pounding on the trade issue.

Some U.S. trade strategists also fear that publicly charging other countries as trade violators would jeopardize support for U.S. market-opening goals in the Uruguay Round, which has been the major objective of American trade policy since 1986.

They also argue that Washington would look foolish by citing other, smaller countries as violators when it is not targeting Japan. As a result, the so-called “zero-option” proposal--not launching any new cases at all--is considered the most likely to prevail.

The exchange between Hills and Congress came as, separately, the Administration announced that Japan had agreed to ease its current restrictions on imports of milled lumber products--a move that could result in about $1 billion in new sales for U.S. firms.

The accord resolves the last of three narrow-interest trade disputes that the United States targeted in last year’s round of unfair trade practice cases. The two other cases involved Japan’s earlier refusal to buy U.S. supercomputers and communications satellites.

In her appearance before the Finance Committee, Hills argued that the 1988 trade legislation--known informally as “Super 301” after the provision that authorizes unfair trade practice actions--was intended to be only a negotiating tool, not an objective in itself.

“There are some circumstances when Super 301 is not the way to get the market open,” Hills told the panel. She said Japan had granted the United States so many concessions this year, “I cannot find a place . . . where I feel that Super 301 is the best tool to use.”

Earlier, senators had been adamant in warning of a serious backlash in Congress if Hills did not cite Japan. Sen. Max Baucus (D-Mont.), chairman of the panel’s trade subcommittee, said the decision “could spark a crisis between Congress and the Administration.”

Finance Committee Chairman Lloyd Bentsen (D-Tex.) went even further, warning that such action “might poison the well” for congressional approval of new trade agreements that the Administration might negotiate, such as the Uruguay Round accord or a U.S.-Soviet trade pact.

And Sen. John C. Danforth (R-Mo.), one of the major authors of the 1988 legislation, contended that the law gave the Administration no option in citing alleged trade violators. He charged that the White House was moving to “undermine the structure” of the 1988 trade law.

Only two members of the committee--Republican Robert Packwood of Oregon and Democrat Bill Bradley of New Jersey--defended Hills’ position on Japan. “I think Japan has met what we asked,” Packwood said. “Name someone else . . . if it has to be done to satisfy demands.”

One factor in the Administration’s reluctance to use the Super 301 provision again this year has been the adverse reaction that last year’s cases sparked--not only from Japan, but from virtually all major U.S. trading partners, even those not formally cited.

Particularly distasteful to many countries is that the law enables the United States to retaliate against alleged trade violators by imposing sanctions outside of established dispute-settlement machinery--a practice they dismiss as “unilateralism.”

The Administration also cited Brazil and India last year--largely to avoid making it seem that it was singling out Japan. U.S. negotiators won a settlement from Brazil, but were rebuffed by India.

Officials have said they may target India again, though that now seems unlikely.