U.S., Japanese Near Agreement on Chip Pact Extension
American and Japanese trade officials are expected to announce today that they have reached agreement on a new pact governing the computer chip trade between the two countries.
The accord is an extension of a five-year agreement signed in 1986 and calls for sales of foreign semiconductors in Japan to reach 20% by the end of next year. It will also result in the lifting of $165 million in trade sanctions imposed on Japan two years ago.
Unlike the earlier agreement, the new pact does not establish a floor price for the sale of Japanese semiconductors in the United States, provisions that had angered U.S. computer makers. Chip and computer vendors established a joint position before entering the talks that led to today’s agreement.
One of the knottiest issues was the matter of sanctions imposed by President Reagan after his finding that Japan was not living up to parts of the original 1986 pact that called for the U.S. share of the Japanese market in semiconductors to increase.
Japan had made the lifting of sanctions a precondition for a new semiconductor agreement. The U.S. industry was not opposing doing away with the sanctions, which placed a 100% penalty duty on imports of Japanese high-performance computers, including laptops. Industry sources said the sanctions had lost any practical impact as Japanese companies shipped components into the United States for assembly into computers, thereby avoiding the penalty duties on the finished product.
Semiconductors are the building blocks of the information revolution. The chips, made up of tiny circuits in silicon, are crucial for a host of products ranging from wristwatches and telephones to computers and the advanced weapons that won the Persian Gulf War.
U.S. chip makers argued that the decline of U.S. semiconductor manufacturing would harm the country’s international competitiveness in advanced technology. That argument was picked up by some economists and military strategists during the Gulf War, when the United States had to go to foreign governments to speed the delivery of semiconductors needed for weapons and communications equipment.
But the original agreement was controversial. Some economists said it formed a global cartel for semiconductors, artificially raising their costs. And U.S. computer makers, who initially supported the agreement, complained that it caused a shortage of chips and price increases that made their products less competitive.
The original agreement was supposed to increase U.S. sales of semiconductors in the Japanese market to 20% by this year. But that figure was disputed by the Japanese because it was contained only in a secret side letter and was not part of the documents that both sides made public.
In the new pact, industry officials said, the 20% figure will be clearly stated.
U.S. semiconductor sales got off to a slow start but have spurted in recent years, and industry sources said foreign-made semiconductors now total 13.3% of the Japanese markets.
