FOCUS : Japanese Contractors Facing U.S. Retaliation : Construction: The Administration wants Toyko to provide more access to American firms seeking public works contracts there.

Bush Administration officials this week are expected to decide whether to bar Japanese construction firms from some U.S. government projects in retaliation for Japan’s alleged refusal to grant broader access to American firms seeking public works contracts there.

Japan can still avert the retaliatory measures by reaching a deal with U.S. negotiators before May 1. Negotiations, which have taken place over the past three years, resumed Friday and are expected to continue this week.

Unless U.S. Trade Representative Carla Anderson Hills decides by May 1 that the Japanese construction market is open to American contractors, retaliation under U.S. trade law is possible. The law prohibits foreign companies in countries that discriminate against U.S. firms from participating in some federally funded transportation, energy and water projects.

If carried out, it would be the first trade retaliation against Japan by the White House since 1987, when the Reagan Administration placed punitive tariffs on Japanese electronics goods on grounds that Japan had violated a trade agreement involving semiconductors.

Existing Japanese construction contracts in this country would not be affected by any new sanctions, and the proposed ban would not apply to private contracting.

The issue is important primarily because it could heighten tensions between Tokyo and Washington, possibly making it more difficult for the two governments to resolve other trade disputes. For example, U.S. trade negotiators are trying to persuade Japan to end its ban on rice imports.

However, the underlying issue in the construction flap is private-sector contracting--not public-sector deals.

Japanese firms won only about $100 million in contracts from the U.S. government in 1989. American construction companies are actually getting a comparable level of contract business from the Japanese government--about $98 million in 1989 and $200 million in 1990.

But Japanese construction firms won about $2.7 billion worth of new work from the U.S. private sector in 1989, according to U.S. officials. However, U.S. firms won only about $96 million in private-sector contracts in Japan that year.

In all, $373 billion in private contracts were let in Japan in 1989, making it the leading market for private construction deals. There were $320 billion in private contracting deals in the United States in 1989.

Indeed, Washington really hopes to get the attention of Japan’s private contracting industry by pressuring Tokyo to allow U.S. companies more access to Japanese government projects.

“If we’re able to get better access to the Japanese public sector, we hope that will have a door-opening effect on the private sector in Japan,” said one U.S. trade official. “If U.S. firms get more public works projects, they will gain experience in Japan and develop relationships with Japanese firms. That will put American companies in a better position to get private contracts.”

“We’re trying to develop working partnerships with Japanese companies in the industry,” said John L. Moore, chief of Bechtel Corp.’s Asian operations. “The Japanese market for construction is absolutely huge. We expect it to be the leading (construction) market over the next 15 years.”

The U.S. government has contended that Japanese construction firms engage in a “clandestine sharing process,” alleging that the firms sublet contracts to each other on a quid pro quo basis to ensure constant business activity and keep out foreign bidders.

Washington has already won some concessions from the Japanese government. Under U.S. pressure, Japan agreed in 1987 that U.S. firms could bid on work on the Kansai International Airport being built on an artificial island in Osaka Bay. Irvine-based Fluor Daniel subsequently won a contract to help manage the construction.

Later, Japan agreed to set aside portions of 17 large public works projects for special foreign bidding. American firms winning portions of the 17 contracts include Fluor Daniel and San Francisco-based Bechtel.

U.S. negotiators have tried repeatedly since 1989 to expand and amend the agreement, but Japan has resisted U.S. requests to increase the number of eligible projects. Japanese officials contend that their market is already essentially open and that the 17 projects are special cases intended to help U.S. firms get experience in the Japanese contracting process.

Some Japanese officials also say the U.S. public contracting market is restrictive, contending that foreign firms cannot easily secure construction contracts for U.S. airports.

If the U.S. bars Japanese firms from American government contracts, the Japanese would suspend the agreement giving U.S. firms access to the 17 projects, Japanese officials have said.