Come On In, the Water’s Fine! : Japan says it will open up construction bidding process to U.S.

Is this an overture? Or yet another discordant deception?

Tokyo now says it will open its lucrative public-sector construction projects to foreign competition.

Already the initiative is being greeted with skepticism by the very U.S. companies that stand to benefit if Tokyo’s professed change of heart is genuine.

Much is to be gained in U.S.-Japan relations should Tokyo come up with a credible plan to allow foreign firms to enter its lucrative public construction market.

Without real reforms, Japan’s public-sector construction industry, ridden by scandals, will continue to undermine the nation’s foreign trade relations.

This week, in a surprise move, Tokyo agreed to eliminate restrictive practices that virtually shut out foreign construction firms from bidding on Japan’s public-sector construction projects. By doing so, it managed to get the Clinton Administration to postpone trade sanctions that would have barred Japanese firms from bidding on some federal construction projects in the United States.

But the all-important details are yet to come. U.S. Trade Representative Mickey Kantor put Tokyo on notice that the details of the plan must be in by Jan. 20 or trade sanctions might be imposed then.

Prime Minister Morihiro Hosokawa is expected to present an action plan to open the market when he confers with President Clinton in Seattle next month after a meeting of Asia-Pacific nations.

The U.S. construction industry--California is home of three of the nation’s largest engineering and construction firms--has been all but shut out of Japan despite five years of bilateral trade agreements.

The current Japanese system--in which the government in a vague, subjective and secretive ranking process selects no more than 10 companies to bid on a project--is the obvious culprit. Dismantling that would help address the huge asymmetry in market access. U.S. firms account for a 45% share in the global construction and design market but just 0.1% in Japan.

Tokyo’s newly stated willingness to open its market may reflect changes in Japan’s internal politics rather than the threat of sanctions. Public prosecutors, backed by the anti-corruption coalition government of Hosokawa, have widened their crackdown on construction scandals that link contractors to politicians. The industry has long been a big backer of the Liberal Democratic Party, which recently lost power. Another factor is Prime Minister Hosokawa himself. Opening up construction contracts would burnish his image as a reformer.