U.S. Set to Impose Sanctions on Japan : Trade: The White House says it is prepared to apply several hundred million dollars' worth of restrictions.

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Declaring that "the Japanese government is going to have to . . . play fair," the White House said Tuesday that it is prepared to impose several hundred million dollars' worth of sanctions on Japanese products, in retaliation for obstacles encountered by a U.S. communications company trying to sell its cellular telephone service in Tokyo.

"We will act with dispatch," U.S. Trade Representative Mickey Kantor said. ". . . .This is an extremely important issue that goes to the heart of this Administration's efforts to open restricted foreign markets to U.S. products."

As portrayed by the Clinton Administration and trade experts outside of government, the case, which involves Motorola Inc., typifies the problems that foreign countries face when they try to enter the lucrative--and highly regulated--Japanese market.

Coming only days after President Clinton and Japanese Prime Minister Morihiro Hosokawa acknowledged they had been unable to break a stalemate in stalled trade talks, the dispute over the Motorola case has become the focal point of the escalating tensions between the world's two largest economies.

The animosity is likely to spill over onto the broader U.S.-Japanese dispute over trade in automobiles, medical equipment, insurance services and other telecommunications issues.

Thus, the punitive steps under consideration are likely to be only the first in a series of responses to Japan's refusal to bring down its $60-billion trade surplus with the United States. Administration officials have said one of the next steps could be the reimposition of a lapsed provision in the U.S. trade code that lets the government slap tariffs on countries it believes engage in unfair trade practices.

Detailing multiple transpacific agreements made over the past decade and then broken by Japan, Kantor said the cellular telephone case is "a perfect example of the closed market in Japan."

Japan's failure to live up to the agreements has kept the company from becoming competitive in the corridor stretching from Tokyo 155 miles southwest to Nagoya, where 60 million people live, said Christopher B. Galvin, Motorola's president and chief operating officer.

That failure, he said, has cost the company $250 million to $300 million in cellular telephone business.

With thousands of new customers signing up daily, the cellular telephone industry is one of the fastest-growing businesses in the world, and Japan is a key foreign market.

Motorola claims it has signed up 49% of the market in the seaport city of Osaka, but has attracted only 12,900 subscribers in the much bigger Tokyo-Nagoya region.

By contrast, Japanese systems marketed by Nippon Telegraph and Telephone, Japan's state-owned telecommunications company, and Nippon Ido Taushin, have roughly 1.2 million customers.

According to Kantor and Galvin, who spoke at separate news conferences, Motorola has been trying since the early 1980s to enter the cellular telephone market in Japan, but was first blocked by technical standards prepared by Japanese manufacturers of telecommunications equipment.

In 1985, a U.S.-Japanese agreement provided for the inclusion of foreign companies on a panel that would recommend to the Japanese government specific standards for cellular telephone service, and the committee eventually recommended, among others, a system compatible with the Motorola service.

Over the years, however, other obstacles were erected: The opportunity to provide cellular telephone service was dished out to various Japanese companies, depriving Motorola of a significant share; frequencies assigned to Motorola would not operate in the heavily populated Tokyo-Nagoya corridor, making the system less attractive to potential subscribers; then, several years after an agreement was reached to link Motorola to a Japanese system in that region--in response to a George Bush Administration threat to raise taxes on such Japanese products as color television sets and tape recorders sold here--the Japanese partner continued to delay installation of necessary equipment.

"We can no longer accept a situation in which a removal of each barrier only leads to the erection of a new barrier to replace it," Kantor said.

Japanese Ambassador Takakazu Kuriyama, interviewed on CNN, called for restraint, but made it clear that Japan would use international trade rules accepted by the United States to challenge the legality of any sanctions.

The delays encountered by Motorola are typical of the barriers placed in the way of foreign firms, regardless of the industry, said Clyde Prestowitz, a former U.S. trade negotiator.

* TRADE WAR TRADE-OFFS

The spat could have positive aspects, Tom Petruno writes. D3

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