NEWS ANALYSIS : Entourage Alters Bush Trip Focus : Tour: Rather than a diplomatic mission, the business leaders hope to make practical progress on trade.
U.S. business leaders on President Bush’s Asia trip, which begins today, will address a wide range of issues. But they are clear on their top priority: more practical progress on trade, particularly from Japan.
Quick progress on that issue and others, however, seems unlikely. Most trade experts say that many of the problems--particularly concerning U.S.-Japan trade in general and U.S. access to the Japanese auto and rice industries in particular--are far too complex for a quick solution.
“I’d be very surprised if (the U.S. delegation) came home and said, ‘Yeah, they listened,’ ” said Edward Sullivan, an auto analyst with the Philadelphia-based WEFA Group of economic forecasters.
The White House has made much of the claim that this is the first time a U.S. President has taken business leaders along on such a tour, and adding them has indeed changed the focus to more of a trade mission than a diplomatic one.
Long-term plans could be laid for everything from free-trade agreements with the South East Asian nations to readmitting Vietnam to the regional economic scene.
The President, outgoing Commerce Secretary Robert A. Mosbacher and the business leaders--including the heads of the beleaguered Big Three auto makers--will visit Australia, Singapore, South Korea and Japan. The first stop is Australia, where Australian wheat farmers object to a U.S. program that they say is flooding their traditional markets in the Middle East and Asia with subsidized U.S. grain.
Yet all in all, U.S.-Australian trade--in which the United States has enjoyed substantial surpluses for the past 20 years--is not a major point of contention.
Neither are trade relations with Singapore, where in a short visit the group will concentrate on future dealings with members of the Assn. of South East Asian Nations, or ASEAN. Those nations--Singapore, Indonesia, Malaysia, the Philippines, Thailand and Brunei--have expressed interest in a regional free-trade agreement with the United States perhaps 15 years down the road.
In South Korea, the discussions will likely include U.S. complaints about foreign-investment hurdles, as well as a Korean campaign to avoid buying luxury items, many of which are imported from the United States.
Both South Korea and Japan are being pressed to open their markets to U.S. rice exports. Japan has already announced that it will make no change timed to the Bush visit, though many believe that would be a relatively easy concession. Despite this, rice imports may be closer than many think.
“The Japanese have been scouting out California and other rice-growing areas,” noted Gregory Mignano, executive director of the California State World Trade Commission, who saw similar patterns when Japan opened other farm markets in years past. “If the Japanese know they are going to be importing rice, they want to be growing the rice.”
But the most important trade dispute is clearly with Japan and its auto industry.
Japan now controls more than 30% of the U.S. auto market, while U.S. companies account for less than 0.4% of Japanese auto sales. And this lopsided relationship, the heart of the friction with Japan, is expanding relentlessly.
Japanese political leaders said Sunday that they might offer some concessions to the United States. But other Japanese officials complain that they have already done what they can to aid their stricken trade partner.
Above all, many Japanese believe that Japanese policies are not to blame--that U.S. auto makers are simply late getting into the Japanese market.
Many Japanese maintain that U.S. auto companies haven’t exerted the efforts that even other U.S. industries have.
The U.S. Semiconductor Industry Assn., for instance, began organizing nearly a decade ago and has been hammering for access and adapting their products to the Japanese market ever since. As a result, chip companies are gradually increasing their share of the Japanese market.
U.S. auto makers object, for their part, to the Japanese tradition of interlocking companies. Even when Japanese manufacturers began making cars in the United States, they brought along their own parts suppliers--a particularly sore point with U.S. producers because the market in car parts is generally seen as more important even than whole cars.
“They don’t know why they should have to buy from someone else--it’s a mindset,” said Heinz Prechter, chief executive of Michigan-based ASC Inc., which introduced the auto sunroof to America. He also is chairman of the President’s Export Council and a member of the business delegation.
Thursday, the Japanese Finance Ministry announced that Japan’s current-account trade surplus with the United States, after eight consecutive months of expansion, had more than tripled in the past year--leaping from $1.69 billion in November, 1990, to $7.26 billion last month. Fully three-fourths of the $41-billion estimated total trade imbalance in 1991 comes from autos and auto parts. And the auto industry gap is expected only to get worse, according to early estimates from a federally commissioned study of U.S.-Japan trade.
At the end of last week, an official of Japan’s Ministry of Foreign Affairs said Japan was considering increased auto imports, deeper voluntary export restraints on autos and machine tools and a re-examination of government procurement rules on purchases of foreign computers. Japan announced in November that its auto companies will increase purchases of imported auto parts by 80% by 1994, amounting to $7.4 billion from factories in Japan and $24.6 billion by Japanese factories in the U.S.
The Toughest Trade Nut
Over the last two decades, the U.S. trade deficit with Japan has grown from $3.5 billion to an expected $41 billion in 1991. Today, three-quarters of the deficit comes from a trade imbalance in autos and auto parts, a disparity that continues to dramatically increase. Autos have become the dominant trade dispute between the two countries, dwarfing even the efforts of U.S. farmers to export rice to the Japanese market. The nubs of the conflict:
U.S. Auto Industry:
Wants Japan to lower its voluntary cap on auto exports to the U.S., noting that EuropeanCommunity recently set a 16% cap. However, President Bush apparently opposes a tighter cap asa restraint of trade.
Wants Japan to relax auto-emissions inspections and other practices that it considersinformal trade barriers to selling U.S. cars in Japan.
Wants Japan to use more U.S.-made auto parts, not just parts built by U.S.-basedJapanese companies. Auto makers object to the traditional Japanese system of interlockingsuppliers.
Japanese Auto Industry:
Notes it is already exporting below the voluntary U.S. export cap, which takes theform of limits on the number of vehicles each Japanese manufacturer can export.
Japanese are wary of quality of U.S. cars and say U.S. car companies have notworked hard enough to compete in Japan’s market, continuing such practices asproducing cars that use English, not metric-sized, nuts and bolts andleft-hand steering.
Japanese say that U.S.-based parts companies should be considered domestic,adding that U.S. parts are either more costly or of lesser quality thanJapanese-made parts.
Parrish reported from Los Angeles and Helm from Tokyo.
* MAIN STORY: A1
