U.S. Reimposes Law to Allow Trade Sanctions on Japan : Markets: Super 301 measure permits punitive tariffs against nations found to deal unfairly. Such action could devastate O.C., with Japan its biggest trade partner.
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.
That is good news in Orange County, where business leaders stress that Japan is the county’s single largest trade partner and warn that a wide-scale trade war could be devastating to the fragile local economy, which is only just beginning to recover.
“I am not sure this will go that far,” said Donald Miller, president of the World Trade Center Assn. of Orange County. “Anything (Administration officials) do, I hope, will be minor.”
Like other business leaders monitoring the growing trade dispute, Miller said Clinton was right to point out disparities in trade with Japan and to try to work toward solving longstanding issues.
“I would agree they need to open up their market to certain products to create a more level playing field,” Miller said.
He quickly added, however, “I don’t think this is the best way to do it.”
Tom Wilck, past president of the Orange County Chamber of Commerce, agreed that Clinton inevitably had to “raise the ante” by reinstituting Super 301.
“The chamber is certainly in favor of supporting free trade,” Wilck said. But he echoed Miller in saying he hopes that, for the sake of Orange County’s economic future, Super 301 is never used.
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.
Apart from that statement, Administration officials have yet to single out specific industries, prompting executives at several Japanese-owned companies with U.S. headquarters in Orange County to say they are uncertain what effect Thursday’s decision will have on their operations.
Under Super 301 terms, U.S. trade negotiators could pick and choose which Japanese products would face steep tariffs or be banned from entering the United States.
If, for instance, the Clinton Administration decides not to focus on electronics parts, companies such as Mitsubishi Electronics America Inc., based in Cypress, and Toshiba America Inc., in Irvine, would not be affected.
“It’s hard to say how the Administration will use the powers,” said Tom Chapman, a Mitsubishi spokesman. “Hopefully, they won’t have to use it at all.”
But Kantor explained that the procedure “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 his order will help to “open markets that will create better jobs and increase wages at home and abroad.”
That goal in mind, some Japanese companies with production facilities in Southern California have been hedging their bets.
At Toshiba America, for instance, the company is moving closer to complete independence from the parent firm in Japan, said Toshiba spokesman Bob Wittenberg.
Toshiba makes its computerized notebooks in Irvine using many locally produced parts, and manufactures television sets in Tennessee using picture tubes made in New York. Such practices protect multinational companies in the event of a trade war, he said.
“It’s important for us to have a high level of local procurement,” Wittenberg said.
Meanwhile, in Japan, emotions were high. Hosokawa told Parliament that he hopes the United States will “take sensible action based on a sensible judgment.”
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
