U.S. and Japan Reportedly Reach Trade Settlement : Commerce: The accord will allow the two countries to resume their market-opening talks, which collapsed in February.


U.S. and Japanese negotiators broke through a three-month deadlock in high-stakes trade talks Monday, forging a compromise that ended five days of intense deliberations, according to sources close to the discussions.

Trade officials from the two countries met last night at the headquarters of the U.S. trade representative, putting final touches on an agreement that would strike a middle ground between Japanese fears of U.S.-imposed market quotas and American demands for measurable results in opening Japan's economy, sources said. The accord was to be announced this morning, the sources said.

The settlement will enable the two countries to resume their so-called framework talks, formal market-opening talks that were launched by President Clinton in July but collapsed in February after a White House summit with Japan's then-prime minister, Morihiro Hosokawa.

Much of the past week's discussion was about the semantics of the framework talks, which had been a major reason for the breakdown in those negotiations.

The key points of Monday's compromise, according to U.S. officials, included a formal acceptance by the Japanese government that measurable results be the gauge of whether the Japanese market has opened to foreign products, as the Clinton Administration had sought.

In addition, the Japanese government agreed that the results-oriented standard would apply to specific sectors of the market, not only to the economy as a whole.

Meanwhile, the United States would assure Japan in writing that it will not rely solely on "numerical targets" to determine progress on trade issues. The Japanese government had rejected that phrase, saying it was tantamount to negotiated market quotas and a form of managed trade.

U.S. officials insist they have never sought assurance of specific market share or managed trade.

The arrangement should clear the way for working-level negotiators to resume meeting on trade disputes in specific sectors, including automobiles, auto parts, telecommunications, medical equipment and insurance.

The countries hope to make progress in settling their differences in those areas before Clinton and new Japanese Prime Minister Tsutomu Hata are to meet at the summit of leaders from the Group of Seven major industrial nations in Naples in July. Essentially, the agreement culminates an elaborate series of talks about whether to have more talks. The United States and Japan remain at loggerheads on a host of critical issues.

Last week's discussions were only the latest turn in a long-running and deadly serious dispute between the world's two largest economies about how to resolve their nagging trade differences.

At the heart of the confrontation is Japan's bloated trade surplus with the United States, which this year is expected to top $60 billion.

Concern that the two governments would be unable to rein in Japan's trade surplus--and the perception that the United States would use a weak dollar to bludgeon Japan into concessions--have tempted currency traders to sell dollars, pushing down their value and raising the likelihood that the Federal Reserve Board would have to raise interest rates again.

In New York on Monday, the dollar traded at 104.36 yen, up from 104.05 on Friday. The volatility of the currency markets has helped change perceptions on both sides of the Pacific Ocean about the need for visible progress in the framework talks. At the time of their February meeting, Clinton and Hosokawa each saw domestic political advantages in talking tough. But now both sides are rethinking that stance.

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