U.S.-Japan Trade Agreement Seeks ‘New Partnership’ : Summit: Clinton announces pact in which Tokyo agrees to make ‘highly significant’ reductions in trade surplus. In return, the U.S. will press for deficit cuts.

President Clinton announced today that the United States and Japan have worked out a new bilateral trade agreement aimed at defining how the severe and chronic economic tensions between the two countries will be worked out.

The deal was announced after Clinton said Friday that there needs to be “a new relationship” governing economic ties between the United States and Japan. U.S. and Japanese negotiators had gone into the final hours of the President’s visit here in an effort to work out the agreement he seeks to narrow the huge trade imbalance between the two countries.

Under the agreement, which calls for a “new economic partnership” between Washington and Tokyo, Japan agreed to make “highly significant” reductions in its trade surplus with the rest of the world and similar increases in its imports from overseas.

The Clinton Administration agreed to press forward in making “significant cuts” in the U.S. budget deficit.

Appearing before television cameras with Japanese Prime Minister Kiichi Miyazawa, Clinton called the agreement “a basic bargain. . . . Both sides made some tough choices.”

Both he and Miyazawa sought to portray the deal as one benefiting not only the United States and Japan, but also the overall stability of the international trading system, which has been disrupted by Japan’s huge surpluses.

“Today’s agreement is an important step towards a more balanced trade relationship between the United States and Japan, but it also benefits the world trading system,” Clinton declared.

In order to win the deal, the Clinton Administration was forced to back away from its earlier insistence on setting numerical targets for Japan to meet in increasing its imports and reducing its deficit.

Instead, Clinton said the two governments had agreed to work out, over the next few months, a series of “results-oriented” agreements, apparently without numerical targets, that would increase Japanese imports or purchases of American auto parts, computers, medical equipment, satellites and insurance.

The so-called “framework” accord does not itself settle trade disputes between the United States and Japan but rather spells out the ways by which these frictions will be judged and resolved. Clinton and Miyazawa had agreed last April to work out such an accord by the time of this week’s Tokyo economic summit of the world’s seven leading industrial nations.

The framework agreement means that Clinton Administration officials finally decided to work out a deal with Miyazawa’s lame-duck government and not to wait to see if they can get a better agreement later this month, after Japanese voters go to the polls to elect new leaders.

“There’s a big risk that if you wait until there’s a new (Japanese) government, that you don’t get as much as you get now,” admitted one senior Administration official early this morning. “You don’t know what the new government’s going to look like.”

Before leaving Tokyo for Seoul early today, Clinton also held a final meeting with Russian President Boris N. Yeltsin, telling reporters afterward that the two nations “have a good partnership.”

Clinton said Yeltsin had invited him to make his first presidential visit to Moscow, that he had accepted and that he hopes it will take place this year.

Yeltsin said the two had discussed a host of issues, from the threat of nuclear weapons in North Korea to the status of Middle East peace talks to the various wars and border tensions in parts of the former Soviet domain.

He said the former Cold War foes had agreed to invite Ukraine to three-party negotiations on nuclear weapons to resolve Kiev’s contention that the Soviet-built nuclear arsenal on its territory has become Ukrainian property.

Clinton and Yeltsin failed, however, to resolve a continuing dispute over Russia’s plans to sell missile technology to India. Administration officials fear the sale would spur the arms race in South Asia. Clinton said negotiations on that issue would continue next week.

Soon after his session with Yeltsin and the trade announcement, the President boarded Air Force One to fly to Seoul to visit America’s other Asian ally, South Korea. Clinton will meet with Korean President Kim Young Sam, address the Korean National Assembly and visit with U.S. troops near the demilitarized zone between South and North Korea.

In the final full day of his visit to Japan, Clinton sought Friday to put the best face on relations between Washington and Tokyo.

“I have tried very hard to move this dialogue into a constructive frame of mind,” he told reporters at a press conference Friday night. “. . . I tried to go beyond the rhetoric and finger-pointing on both sides. . . . I feel much more positively about the relationship (between the United States and Japan) than I did when I came here.”

The President also clearly tried to show that he and the American people identify with the mood for political change that has swept across Japan over the past few months and which may bring about an end to decades of rule by the Liberal Democratic Party.

“I sense a real sense of anticipation and openness here that’s perhaps a little greater than it has been in past years,” Clinton declared.

Throughout the week, the President repeatedly pressed the theme that a change in trade relations between the United States and Japan would be good for the Japanese public, because a more open Japanese market would enable people here to buy more imported products at cheaper prices.

At the same time, in his final press conference before the summit’s official close, Clinton took care to praise Miyazawa, the symbol of Japan’s old political order. The prime minister had “displayed a great deal of energy and vigor” this week, he said.

The President’s five-day visit to Tokyo was considerably more harmonious than his earlier dealings with Japan since taking office in January.

In the early days of his Administration, Clinton and his aides openly resisted Japanese requests for an immediate summit meeting between the two countries. Japan had wanted a high-level meeting with Clinton before or within days after he was sworn in. But Clinton made clear that his top priorities were domestic, and he would not give Miyazawa the time for a meeting until the spring.

When the two leaders finally got together in Washington last April, the tone was strikingly discordant. Talking tough as he stood beside Miyazawa at a White House press conference, Clinton insisted that there would have to be serious change in Japan’s huge trade and current-account surpluses with the United States and the rest of the world.

“Let’s not paper this over,” the President told Miyazawa at the time.

The two leaders agreed that as a first step, their governments should work out a framework agreement on trade by the time of this week’s G-7 economic summit. Such an agreement would not by itself settle trade disputes between the two countries, but merely spell out the process by which the disagreements will be handled.

However, American and Japanese negotiators were at first so far apart that they soon bogged down in trying to reach even these modest goals.

Administration officials wanted an accord that would set specific, numerical targets for Japan to meet in increasing imports and in bringing down its huge trade surplus with the rest of the world, which could reach $150 billion this year.

One senior Administration official explained before the summit that the United States was pressing for two specific promises from Japan:

First, the Administration wanted Tokyo to agree to adopt policies that would reduce its current-accounts surplus with the rest of the world from the present level of 3.5% of Japan’s gross domestic product to “the 1.5% to 2% level” over a period of about four years.

Second, the United States pressed Japan to agree to increase its imports from overseas by about one-third.

But Japan repeatedly refused to agree to these targets, contending that adopting them would amount to a form of “managed trade” that would violate the country’s belief in marketplace principles.

American officials icily retorted that Japan for years used fixed numerical targets to divide up market share and did not come around to believing in open, unregulated trade until it served Japanese interests.

Late last month, a delegation of top-level Clinton Administration officials flew to Tokyo in an effort to work out the differences before Clinton’s arrival here. But they went home empty-handed.

“Normally, we don’t walk away from (proposed) deals,” said one senior U.S. official who took part in the talks. “But this (Clinton) Administration is unwilling to step down from a set of views.”

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