U.S. Reimposes Law to Allow Trade Sanctions on Japan : Markets: The measure, called Super 301, permits punitive tariffs against nations found to deal unfairly. Tokyo strongly protests, saying action violates GATT.
Triggering a storm of protests from Japanese leaders, President Clinton on Thursday reinstituted a provision of U.S. trade law that will allow the United States to retaliate against Japanese imports if Japan fails to open its markets to American goods.
The measure will allow the Administration to impose trade sanctions, such as punitive tariffs, against any country found to engage in unfair trade practices that keep U.S. products out of its markets.
Delays built into the process, as well as the Administration’s plan to gradually turn up the pressure on Japan, make it unlikely that the measure, known as Super 301, would have a tangible impact on the cost of Japanese products in this country unless the trade dispute continues to fester until the end of the year.
Nevertheless, there is significant symbolic impact in the decision, which U.S. Trade Representative Mickey Kantor announced after Clinton spoke earlier in the day by telephone with Japanese Prime Minister Morihiro Hosokawa.
The Administration’s action followed the breakdown of trade talks between President Clinton and Hosokawa last month. It brought a warning of trouble to come from Tokyo.
Chief Cabinet Secretary Masayoshi Takemura, the top government spokesman, said today that this kind of “unilateral” measure is “explicitly prohibited” by the General Agreement on Tariffs and Trade. Japan, he said, “strongly hopes that the government of the United States will act in a sensible manner,” but also “recognizes the need for a restrained response.”
Takemura noted that the government has recently “reaffirmed its intention to advance voluntary measures toward further market opening.”
Super 301 expired in 1990, two years after Congress enacted it as part of comprehensive trade legislation. But the Administration has said that it has the authority to reinstate it by presidential order.
During its earlier use, it provoked deep opposition among the Japanese. Although sanctions were never applied, U.S. officials said that, with varying degrees of success, it pushed Japan into increasing purchases of U.S. satellites, some wood products and supercomputers.
The toughened trade regulation, which is to remain in effect through 1995, is one in a series of steps contemplated by the White House to pressure the government in Tokyo to open its markets to U.S. products. In 1993, Japan ran up a $59.3-billion trade surplus with the United States, and a $131-billion global trade surplus.
Simultaneously with the new trade action, the Clinton Administration moved to use antitrust measures to combat Japanese practices judged to inhibit sales of American goods in Japan.
In a speech to the Japan Society in New York, Anne Bingaman, assistant attorney general for antitrust, said the Administration would take legal action against monopolistic practices in Japan and by Japanese companies operating in the United States.
Bingaman noted that Japan has promised for years to stop organizing industry cartels that exclude foreign competitors. “But, after all is said and done,” she said, “the question still remains whether there has really been any meaningful change in Japan.”
As for the decision to reinstate Super 301, it represented a clear signal to Japan, in the wake of the breakdown in trade talks, that the Administration will make it more and more costly for the Hosokawa government to back away from an agreement its predecessor made with Clinton last summer.
At the time, Japan agreed to negotiate a system by which progress could be measured in opening the Japanese market to the United States in four areas: automobiles and auto parts, telecommunications, medical equipment and insurance.
The negotiations fell apart Feb. 11, hours before Clinton and Hosokawa met at the White House, and the prime minister is said by aides to be preparing an import-promoting trade proposal to be announced at the end of March.
The Clinton Administration’s procedure, spelled out in an executive order that the President signed Thursday, would work this way:
* Each year the trade representative would send to Congress a National Trade Estimate Report, which would list trade barriers--quotas, tariffs and other procedures that countries follow to keep out foreign products.
* By Sept. 30, the Administration would identify the nations on the list with the most egregious barriers, setting in motion a short investigation after which tariffs, or taxes on imports, could be levied. The tariffs could be as high as 100% of the value of a specific import.
Without a list of specific countries or industries, it is impossible to determine where the tariffs would be applied. But a senior Administration official pointed out that “autos and auto parts are front and center” in the agreement that brought about the disrupted negotiations.
The procedure, Kantor said, “is a flexible instrument” that permits him “to send our trading partners an early warning that certain of their practices may be identified in the future if they are not eliminated.”
In a written statement, Clinton said that his order will help to “open markets that will create better jobs and increase wages at home and abroad.”
But in Japan, Hosokawa told Parliament that he hopes the United States will “take sensible action based on a sensible judgment.”
Hiroshi Kumagai, minister of international trade and industry, warned at a news conference that the kind of “unilateral” approach embodied in Super 301 would lead to “a shrinkage of global trade through mutual retaliation among trading partners.”
Kumagai said the United States and Japan should remain calm to avoid falling into a “vicious spiral of sanctions and retaliation.” At the same time, he said, Japan should make its utmost efforts to cut its huge trade surplus and improve foreign access to its markets.
The rising tensions over trade brought a further strengthening of the yen and a chill to Tokyo stocks. Foreign-exchange traders were betting that Washington would favor a stronger yen, which makes Japanese exports more expensive in dollar terms and thus harder to sell.
The dollar closed Thursday in Tokyo at 103.92 yen, down 0.9% in the two days since it was reported that the trade provision would be revived. But it rebounded to 104.60 in trading today in Tokyo.
Japanese officials and others questioned whether the unilateral actions contemplated in the President’s order would be permitted under the international trade agreement completed in Geneva in December after a series of negotiations known as the Uruguay Round.
“The European Union will be examining carefully . . . these measures and checking whether their implementation would be contrary to the United States’ trade obligations, including those agreed in the Uruguay Round,” said Leon Brittan, the European commissioner for external economic affairs.
And in Geneva, an official of GATT, which oversees the rules of international trade, has indicated that the organization would look favorably on a complaint that tariffs were being applied unfairly and without adherence to the organization’s procedures.
Indeed, international economist Jagdish Baghwati of Columbia University said, “nothing unites the world against the United States as much as 301.”
But in Washington, the measure was applauded by members of Congress, where pressure has been building for the Administration to take concrete steps in response to the failure of the so-called framework talks with Japan.
Gerstenzang reported from Washington and Holley from Tokyo. Times staff writer Scot Paltrow in New York contributed to this story.
Bringing Out the Big Stick
The Administration, frustrated by Japan’s failure to buy U.S. goods, wants to force Japan to open its markets by reinstating a provision of trade law known as Super 301.
What Is Super 301?
Under the provision, the U.S. trade representative prepares a list of countries that have erected the most egregious trade barriers against American products. After further investigations, the Administration has the power to impose retaliatory tariffs of up to 100%.
Consumer Impact
It is unlikely the measure would have a tangible impact on the cost of Japanese products in this country unless the dispute festers until the end of the year. But U.S. companies, primarily autos and auto parts, stand to achieve major gains if markets open.
U.S. Trade Deficit with Japan
(in millions of dollars)
1993: -$59,318
Sources: U.S. Department of Commerce, Business Statistics, Business America
