U.S. Expects to Cite Japan for Trade Violation
With trade talks broken off, a White House official said Monday that the Clinton Administration expects today to declare Japan in violation of a telecommunications agreement--a move that could pave the way for sanctions against the Japanese and escalate a trade dispute between the world’s two largest economies.
President Clinton warned Japan on Monday not to embark on a tit-for-tat trade war, saying, “I think they would have to think long and hard about it.”
White House officials said that the decision to cite Japan for interfering with a 1989 agreement allowing Motorola Inc. to sell cellular telephone service in the Tokyo vicinity is not tied directly to Friday’s breakdown in U.S.-Japanese trade negotiations.
But the deadline for action today provided a convenient, if coincidental, opportunity to begin the sort of retaliatory and punitive measures that Administration officials said last week were under consideration, and the souring state of Washington’s trade relations with Tokyo gives added weight to the Motorola decision.
Had the talks Friday between Clinton and Japanese Prime Minister Morihiro Hosokawa gone well, there would have been little likelihood that the Administration would take such action today, regardless of the merits of Motorola’s complaint.
“This is clearly a warning shot,” said a congressional source familiar with the Administration’s plans. “It is a very low point from which to escalate.”
With the declaration, specific punitive action against Japan can follow. Placing tariffs on Japanese communications products sold in this country is one measure that could be taken.
Meanwhile, the fallout of the trade dispute landed on foreign currency markets Monday. The dollar fell in value by roughly 3% compared with the yen--making Japanese products more expensive in the United States and U.S. goods cheaper in Japan.
Officials said that more dramatic steps than those anticipated in the Motorola case are contemplated, perhaps as early as next week, in a campaign to put greater pressure on Japan. Senior officials are expected to meet on an almost daily basis to plot their strategy.
The Administration is trying to persuade Tokyo to take specific steps in compliance with an agreement reached last July to devise objective criteria that could be used to measure progress in opening Japanese markets to foreign products. The agreement covers automobiles and auto parts, insurance and government purchases of telecommunications and medical equipment.
The agreement is intended to begin reducing Japan’s $132-billion global trade surplus, nearly $60 billion of it with the United States. In its annual economic report, the Clinton Administration said, however, that removal of all of the barriers Japan erects to keep out foreign products would reduce the United States’ trade deficit with Japan by only $9 billion to $18 billion.
Hosokawa, whose call for continued talks was rejected by the United States on Friday, said after his meeting with Clinton that the two sides needed a cooling-off period. U.S. officials said they would remain open to new proposals from Japan but that they must adhere to the July agreement--and that, barring such progress, the United States considers itself free to take specific steps to put pressure on Japan.
These measures include the likely reintroduction of a trade-code provision, known as Super 301, that could lead to the exclusion of certain Japanese products from the United States, the imposition of strict inspection standards on Japanese autos, the scaling back on tax benefits given to Japanese auto makers in the United States and the stepping up of the use of U.S. laws prohibiting the “dumping” on U.S. markets of products sold at prices below their production costs to undercut U.S. manufacturers.
The Super 301 provision was part of trade legislation passed by Congress in 1988. It was particularly disliked by Japan because it required an annual review of trade barriers abroad and mandated U.S. retaliation if the barriers were not lifted. The law expired in 1990, but Clinton could reimpose it with an executive order.
Clinton told reporters he would “make a decision within a few days” on whether to take other steps against Japan.
Seeking to portray the dispute not as one between the United States and Japan but as one between those who seek more open markets worldwide and Japan, the President said:
“For those of you who worry about a trade war and other things, this is a battle that is raging not just in the United States and in Europe and in all other parts of the world that have been exposed to the mercantilist policies of Japan. This is a battle that is raging in Japan.
The Motorola case involves an effort by the communications company to sell cellular telephones in a 155-mile swath from Tokyo southwest to Nagoya, according to Laura D’Andrea Tyson, who chairs the White House Council of Economic Advisers. She described it as a classic example of Japan’s efforts to keep foreign companies from gaining a foothold in its lucrative market.
“The Japanese claim that U.S. firms don’t try hard enough and that the quality of the U.S. products isn’t there,” a senior Administration official said.
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