Putting on the Brass Knuckles : Bitter U.S. hits Japan with sanction threat
Protecting the status quo is not always good business, especially when it comes to world trade. Japan, that world-beating trader, has a hard time comprehending this. As a result it faces the threat of U.S. sanctions for allegedly strangling U.S. participation in Japan’s lucrative construction industry.
More than anyone else Tokyo, as the ultimate benefactor of free trade, ought to understand that reciprocity is the key to good trade relations. Tokyo has made some notable progress, but sticky problems needlessly continue to undermine U.S.-Japan relations. This is a job for the government. The Japanese construction industry is closely tied to Tokyo’s political Establishment; thus if a trade policy change is going to occur, it should be initiated by Japan’s political leaders. They have to take the lead.
The clock has begun ticking on a 30-day deadline for Washington and Tokyo to resolve their differences over providing U.S. construction firms greater access to the Japanese market. If that deadline passes with no agreement, U.S. Trade Representative Carla A. Hills said Friday that the United States will bar Japanese construction firms from bidding on U.S. public-works projects. She claims that discriminatory practices in Japan against American and other foreign firms allegedly have resulted in the loss of a potential market of billions of dollars.
Under a 1988 U.S.-Japan accord, Tokyo agreed to allow foreign firms to bid on 17 public-works projects, valued at $16.9 billion over the next 10 to 15 years. Those projects, which include the Kansai International Airport, were supposed to demonstrate Japanese openness. But in 1989, U.S. construction firms garnered less than 1%, or $200 million, of Japan’s $168 billion annual public-works contracts. Nearly half of that $200 million was in the 17 projects, according to data compiled by the U.S. Commerce Department. The Japanese public-works market is obviously anything but open.
Lack of access to the Japanese public-works market is mirrored in the private sector as well. U.S. firms secured only $96 million in private contracts in Japan in 1989, compared to the $2.7 billion in private U.S. construction contracts that were won by Japanese firms in the same year.
The disparity can’t be entirely due to the Japanese contention that foreign firms don’t try hard enough. U.S. construction companies have long complained that cartel-like practices within the Japanese construction industry unfairly shut them out of any competitive bidding process. In truth, Tokyo has been resisting U.S. efforts to provide more equitable foreign access to the Japanese market.
To be fair, Tokyo has made progress in opening some of its markets but it falls short of being truly open in the eyes of American and other foreign businesses. Still, despite Tokyo’s lack of cooperation, there is still time to make a deal. Trade ties--and divides--Washington and Tokyo. If Tokyo wants to strengthen those ties, then it must act quickly to address the concerns of its most valuable--and increasingly impatient--trading partner.
