U.S., Japan Tackle Builder Policy : Talks: Tokyo has been warned that it should change a bidding system that has few supporters, even at home.

A potential trade battle between Japan and the United States over Japanese construction policy could indicate that Tokyo is pursuing a cause that has little support, even among its own business leaders.

U.S. and Japanese officials Monday were to begin two days of meetings in Washington, where they were expected to discuss access to construction contracts in Japan.

The meetings represent the first talks since the United States cited Japan as biased against foreign companies in awarding public construction contracts.

“The U.S. has a really good chance to change something in the construction sector, because they’re on our side,” said Kuniko Inoguchi, a political scientist at Sophia University here.

In late April, U.S. Trade Representative Mickey Kantor gave Japan 60 days to end the alleged discriminatory practices. He warned that if it did not, Washington could take action to curb Japanese exports to the United States.

“The U.S. was very, very smart about selecting this sector, considering the likely Japanese response,” said one government official who is not in Japan’s Construction Ministry.

Japanese newspapers say that Washington will call for an open bidding system to replace Japan’s designated system, which has also drawn fire from many on the home front. Japanese negotiators, however, have said they would resist such a demand.

They insist that the meeting will merely review a 1988 bilateral pact giving U.S. builders better access to the Japanese construction market within the framework of the designated system.

Under the designated system, used only for public works projects, national and local governments select qualified builders to participate in a public works tender.

Construction Ministry officials say it is essential to screen out inexperienced and unskilled builders and to provide enough work so that small builders can survive.

U.S. officials have said the system helps block foreign builders from the Japanese market because its selection standards are unclear. Under President George Bush, officials refrained from attacking the system directly.

Domestic Japanese criticism has mounted since it was disclosed earlier this year that leading builders had made large political contributions to former Liberal Democratic Party power broker Shin Kanemaru.

He was indicted in March, accused of evading taxes on donations worth about $31.4 million.

In response to a public outcry, the Construction Ministry has made some changes in public works bidding procedures, but has not considered abolishing the designated system.

“Unless the designated bidding system disappears, huge political contributions and other unfair activities will not end, but bureaucrats want to keep the system because they benefit from it,” said one Japanese industrial analyst.

Critics of the system say it gives officials vast power over the public works sector, since they select which bidders are qualified and have the right to design public projects.

Big construction firms have also come out in favor of an open bidding system. “We do not mind an open system. It is the Construction Ministry officials who want most to keep the (current) system,” said an official at one major building company.

Many public works projects are not attractive to large builders because they offer too little profit potential. Big firms want an open system so they can bid only on lucrative contracts.