US-JAPAN TRADE TENSIONS : High-Stakes Game for State’s Workers : Economy: A trade war could prove devastating to California’s recovery. But some could benefit.

Auto designer Gerald P. Hirshberg has been on both sides of the U.S.-Japan trade dispute. And, as a former designer for General Motors Corp. and now the San Diego-based chief designer for Japanese auto maker Nissan, he still is.

“Anyone who’s being honest who’s working for a foreign company . . . (admits) you’re torn between your allegiances to your country . . . and . . . putting food on the table,” he said.

So how is he viewing the rising trade tensions between the two economic superpowers? “With a wrenched stomach,” he said.

Hirshberg and tens of thousands of other Californians whose jobs depend on ties with Japan are like the proverbial blades of grass that stand to get trampled if the elephants fight.

In this case, the elephants are the governments of Japan and the United States, and Hirshberg and others are watching warily to see if a full-fledged trade war breaks out between them.

A trade war would be particularly disastrous for California, which has stronger trade ties to Japan than other states and whose fragile economy is only now starting to rebound after several years of recession.

Trade with Japan supports about 340,400 state jobs, including those of 146,400 people employed by Japanese-owned companies. Japan accounts for $27.3 billion in direct investments in California property, plants and equipment, a full third of the total foreign investment.

Though many analysts doubt that a full-fledged commercial war will break out, the tensions have been ratcheting up since trade talks between President Clinton and Japanese Prime Minister Morihiro Hosokawa broke down last month.

President Clinton is now paving the way for a potential hike in tariffs on Japanese goods sold in the United States. A senior Japanese trade official warned this week that Japan will retaliate if the United States invokes trade sanctions.

Retaliatory sanctions from Japan could affect California exports, which amounted to $9.7 billion in 1992. At the same time, U.S. sanctions against Japan could imperil crucial supply lines or trading relationships for California firms, executives said.

Of course, California--which exports more to Japan than any other state--stands to reap disproportionate benefits if the Clinton Administration’s policies succeed in opening up Japanese markets.

Meanwhile, state companies feel they are caught in the middle of a dispute not of their making.

“What the U.S. is demanding right now may not be very fair to us,” said Sadao (Bill) Kita, executive director of the Japan Business Assn. in Los Angeles, which represents 640 regional companies that are owned at least in part by Japanese firms.

“We came here to manufacture . . . and we employ a lot of local people,” Kita said. “We are, in our opinion, contributing to the economic betterment of the U.S. Yet we are still considered a foreign element.”

A wide variety of products are now going to Japan, including electronics, industrial machinery, medical devices and a host of agricultural products, from rice to raisins, said Akira Kitagawa, deputy director of the California trade office in Tokyo.

At the same time, Japan has invested heavily in California industry. A firm that exemplifies that is the state’s last remaining automobile plant, a 50-50 joint venture between Toyota and General Motors Corp. in Fremont.

Trade sanctions on imported auto parts would have a negative effect on costs at the plant, which employs 4,300. “Our most immediate concern is the impact on the cost of materials brought in from Japan, such as engines or drive trains” that could not be sourced elsewhere, said Michael Damer, a company spokesman.

It’s unclear how such sanctions would ripple beyond the plant. One U.S. company, Ohio-based Dana Corp., is already set to begin supplying truck frames to the plant from a factory still under construction in nearby Stockton, replacing frames now being brought in from Japan. Sanctions only make that change more desirable.

On the other hand, Dana owns two plants in Japan that supply auto parts to Japanese auto makers. While sanctions would not directly affect those operations, the trade tensions do not help.

Similarly, Apple Computer Inc. in Cupertino, which claims the No. 2 market position for personal computers in Japan, doubts that any sanctions would affect its business there.

Still, Apple does a lot of business both ways: It sells products to Japan and imports key components, including parts such as flat-panel displays that cannot be sourced here.

“We have a big stake in making sure that relations between Japan and the U.S. are smooth and professional and continue uninterrupted,” an Apple spokesman said.

At Nissan Design International, the 15-year-old San Diego design shop for the Japanese auto maker, Hirshberg doubts that a trade war would jeopardize operations directly. But there could be fallout.

For one thing, a strong yen would affect Nissan’s product marketing decisions in the United States. “Then there’s the daily awkwardness of dealing with another culture intimately when you’re standing on the soil of the ‘enemy,’ ” he said.

But there could also be benefits: Trade sanctions could force Japanese companies to move even more manufacturing, engineering or design work to the United States. The risk, however, is that a trade war could delay the recovery of Japan’s recession-battered economy.

“There would be a danger of winning the battle and losing the war,” Hirshberg said.

For some firms--such as California Steel Industries--the Japanese ties are not obvious. Owned in part by Kawasaki Steel Corp. and by a Brazilian mining company, California Steel does little trade with Japan and rarely imports components.

Employing 920 people in part of the old Kaiser plant in Fontana, the maker of steel sheets and pipe deals mainly with California firms. But trade tensions still concern company President Takehiko Haga.

“Because I’m Japanese,” he said, “I hope Japan and the United States keep a good relationship.”

In the short term, the heightened trade tensions might already be generating some regional economic benefits.

As long as Japan does not impose retaliatory sanctions, the tensions may be helping California exports, because they have helped boost the value of the yen in relation to the dollar, said Kitagawa in the state’s Tokyo trade office.

“The price of (California) products will be extremely cheap,” he said.