U.S.-Japan Trade Agreement Sets Up New ‘Rules’ : Summit: Clinton calls the pact, which will serve as a framework for future talks, ‘an important step.’ But it does not mandate cuts in Tokyo’s huge trade surplus.

President Clinton announced today that the United States and Japan have worked out a bilateral trade agreement aimed at setting new “rules for the game” to govern the severe and chronic economic tensions between the two countries.

The deal was announced after Clinton said Friday that “a new relationship” was needed to govern economic ties between the United States and Japan.

U.S. and Japanese negotiators had met into the final hours of the President’s visit to Tokyo for the Group of Seven economic summit in an effort to work out the agreement he sought to narrow the huge trade imbalance between the two countries.

“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.

But the accord itself does not reduce Japan’s $50-billion annual trade surplus with the United States or set any specific numerical targets for doing so, as Administration officials had once hoped a deal might do. Nor does it resolve specific trade disputes over specific sectors of the economy.

Instead, the framework agreement sets a new series of rules designed to govern how future trade talks will be conducted: Over the next six months to a year, the two sides are committed to negotiating a series of specific agreements governing trade in individual areas such as automobiles, insurance, medical equipment, satellites and computers.

Clinton announced the deal in a joint appearance with Japanese Prime Minister Kiichi Miyazawa that came on a hectic final morning of his Tokyo visit, a morning on which the President also met and held a press conference with Russian President Boris N. Yeltsin.

According to Yeltsin, the two presidents 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.

Yeltsin said the former Cold War foes had agreed to invite Ukraine to three-party negotiations on nuclear weapons to resolve Kiev’s claim 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 that the sale would spur the arms race in South Asia. Clinton said negotiations on that issue will continue next week.

After concluding the meetings and announcements, Clinton left here for South Korea, where he planned to switch the focus of his Asian visit from economics to security. While there, Clinton plans to deliver what aides portray as a major speech on Asian security policy and visit the Korean demilitarized zone, the last major locus of Cold War military tensions.

The bilateral trade framework agreement with Japan was the last of three major objectives that White House officials had hoped to achieve during the four-day trip here--the other two being an aid agreement for Russia and a tariff-reduction agreement with Europe and Japan covering manufactured goods.

By reaching the bilateral agreement, the Administration put what it hopes will be a successful final cap on the summit of leaders from the seven most advanced industrial nations. That summit ended Friday afternoon with Clinton and the leaders of Japan, Canada, Britain, France, Germany and Italy pledging to take new steps to revive economic growth and increase jobs in their nations.

“We have a long way to go to restore growth to the world economy,” Clinton said of the summit. But he added, “This summit produced real substantive benefits for the people who sent these leaders here.”

Other leaders were similarly upbeat.

“To be frank, the results are better than I expected,” said British Prime Minister John Major.

“I think we made good progress on some tough issues,” said Canadian Prime Minister Kim Campbell.

The U.S.-Japanese framework agreement announced today 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.

For its part, the Clinton Administration agreed to press forward in making “significant cuts” in the U.S. budget deficit.

Appearing before television cameras, 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.

In order to get 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 that would increase Japanese imports or purchases of U.S. goods. The agreements could include specific numerical targets to use for measuring compliance, but the Japanese did not commit themselves to accept such yardsticks.

Administration officials conceded that they could not guarantee that Japan would actually negotiate in good faith over the next six months.

“After 20 years of trade deals that were not lived up to, there’s a natural skepticism among the American people about any new trade deal with the Japanese,” said one senior Administration official.

The framework agreement means that Clinton Administration officials 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, when Japanese voters go to the polls to elect new leaders.

In the final days of his trip to Japan, Clinton sought 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 said at a Friday night press conference. “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 that may bring about an end to decades of rule by Miyazawa’s 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 said.

Negotiations toward reaching the framework had completely broken down last week but were revived last Friday when Takeo Kuriyama, Japan’s ambassador in Washington, hand-delivered a letter from Miyazawa to Clinton asking him to resume the talks.

“Once it was put on that sort of personal level, the President felt he could not refuse to talk,” a senior White House official said.

U.S. negotiators flew to Tokyo and resumed the talks Sunday. White House officials widely anticipated that Miyazawa would try to close a deal on the framework at the first meeting with Clinton on Tuesday and had urged the President not to make any agreements at that time. To Clinton’s surprise, however, Miyazawa barely raised the subject, saying only that they should leave it to the negotiators.

U.S. officials interpreted that as an indication that the Japanese government had cooled on reaching a deal, perhaps because of opposition from Japan’s powerful Ministry of International Trade and Industry. Some Japanese observers, however, credited the switch to Miyazawa’s longstanding pattern of making deals only at the last possible moment.

Regardless of the cause, the negotiations teetered back and forth throughout the four days of Clinton’s visit here. Late Friday afternoon, a senior official said, the Japanese side made a key concession, dropping their insistence on a sentence that would explicitly say that the “objective criteria” that the agreement provides for would not be defined as numerical targets.

Once the Japanese made that concession, White House officials briefed Clinton late Friday night on where the negotiations stood. The meeting, in Clinton’s hotel suite here, lasted until roughly 2:45 a.m.

By then, Clinton had signed off on the overall shape of the agreement, pending a few last details that were hammered out in overnight negotiations.

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Out of Balance

The United States reached agreement with Japan on a set of principles to govern future negotiations aimed at slashing the two nation’ huge trade imbalance. Figures for April: Japanese exports to U.S. (in millions): $9,181 U.S. exports to Japan: $3,685 U.S. trade balance: -$5,496 Source: Commerce Department