U.S. on Verge of Sanctions Against Tokyo Over Trade : Economy: The Administration says talks on greater access to Japan’s construction market are going poorly.

The Bush Administration is on the verge of retaliating against Japan for its refusal to allow American firms greater access to the Japanese construction market, Administration and congressional sources said Thursday.

The sanctions, which would go into effect in 30 days if a final effort at negotiations fails, would be the first such action against Japan since the Ronald Reagan Administration imposed tariffs on its electronics goods four years ago. It would represent a sharp escalation in the growing economic tensions between the two countries.

U.S. and Japanese officials continued private talks into the night Thursday in hopes of reaching a deal that could avert the retaliatory measures. However, Bush Administration sources said progress was slow and no breakthrough was in sight.

Meanwhile, officials said the Cabinet-level Economic Policy Council has voted unanimously to authorize retaliation should the negotiations break down. That authorization would begin a 30-day period for public comment before any sanctions actually took effect.

Under various laws, the retaliatory measures could take three forms: The United States could impose punitive tariffs, quotas or other restrictions that would bar certain Japanese products from this country; it could ban Japanese firms from all government contracts here, or it could prevent their bidding on certain types of U.S. government business, including transportation and waterways.

Although the actual amount of international commerce affected by such retaliation would be relatively small--Japanese firms won only about $100 million in U.S. government contracts in 1989--any such move would be a political blow to U.S.-Japanese relations, which already are being strained by Tokyo’s refusal to help more fully during Operation Desert Storm.

And, although the punitive measures would focus on government contracts, the underlying dispute centers on Japan’s giant private construction market. Despite a pledge by Tokyo in 1989 that it would open up its construction bidding, U.S. firms won only $96 million in private contracts in Japan in 1989, whereas Japanese firms received $2.7 billion worth in this country.

The U.S. government has contended that Japanese construction firms use a “clandestine sharing process” of subletting contracts to each other to keep foreign bidders out of their country’s private construction market.

Under U.S. pressure, Japan agreed in 1987 to allow U.S. firms to bid on contracts for the Kansai International Airport and later said it would set aside 17 large public works projects for foreign bidders. In all, the projects will be worth an estimated $16.9 billion over the next decade.

Since then, however, Japan has resisted U.S. demands that it expand that agreement.

The dispute is one of several that are simmering between the two countries.

In what has become an intensely emotional battle, U.S. officials are trying to persuade Japan to open its rice market to foreign imports--a move that could be a boon to California farmers. Negotiators are also trying to resolve America’s complaints that U.S. semiconductor manufacturers are shut out of Japanese markets.

And relations were further strained by the Persian Gulf War, during which the United States complained that Japan was not paying a fair share.

If the United States retaliates in this tense economic climate, some officials say, it may find itself the target of similar moves by the Japanese. “The real question is what (the Japanese) are going to do in return,” one source said.

In a separate development, U.S. Trade Representative Carla Anderson Hills is expected to announce today that the Administration has identified several other countries as targets for possible retaliation, sources said.

China, Thailand, India and New Zealand are expected to be cited for violations of so-called intellectual property rights established by copyrights and patents. In particular, U.S. pharmaceutical firms have complained that foreign governments restrict the access for the products and refuse to pay proper royalties.

The 12-nation European Community also will be named because of policies that it has adopted that seek to limit the number of U.S. television shows and movies that may be broadcast there, officials said.

Once Hills identifies these countries as possible retaliation targets, she will invite them to begin formal negotiations aimed at remedying the U.S. complaints. The United States would take punitive action only if those talks fail.