U.S. to Stress Exports to Japan Instead of Deficit

The White House has concluded that it will be unable to reduce the growing trade deficit with Japan during President Clinton’s first term and no longer considers doing so a key political objective, the Administration’s chief trade negotiator indicated Friday.

Instead of aiming for a specific reduction in the U.S.-Japan trade deficit, now about $60 billion a year, the Administration will emphasize Clinton’s efforts to increase exports in select industries, U.S. Trade Representative Mickey Kantor said.

In an interview with Times reporters, Kantor downplayed any assertion that the Administration is retreating from attempts to get tough with Japan on trade. He noted that talks are continuing on developing a new framework for trade relations between the two nations in a number of important industrial sectors.

Still, it appears the Administration has changed its goal of attempting to set specific targets to reduce the overall U.S.-Japan trade deficit. The deficit has become a highly visible reminder of the United States’ uncertain standing in the competitive global marketplace.

Administration officials and many private economists agree that the level of U.S. exports is a more direct measure of the United States’ ability to eliminate the barriers that make it difficult for U.S. firms to do business in foreign markets.

That is because the trade deficit also reflects purchases of foreign goods by Americans, and the gap can widen even if U.S. exports are rising and contributing to job growth in this country.

The absolute size of the U.S.-Japan deficit “is less important . . . than the content of the deficit,” Kantor said. “What has worried us most about the closed markets in Japan and what the framework talks are aimed at are those sectors where we have the highest potential growth: semiconductors, electronics, computers, supercomputers, auto and auto parts, services like insurance and financial services.”

In the 1992 election campaign, Clinton cited the growing deficit with Japan as evidence that the George Bush Administration had not moved aggressively enough to open up restricted markets. He promised to make vigorous trade policy a central element of his strategy for economic renewal, estimating that every $1 billion in additional U.S. exports would create 20,000 to 30,000 new jobs in this country.

Kantor, addressing another touchy competitiveness issue, said that the U.S. trade gap with China ultimately could rival in size the troublesome deficit with Japan.

Speaking just a week after Clinton announced renewal of Beijing’s most-favored-nation trade status, he said that tough negotiations lie ahead to ensure that China complies with international trade laws as it grows into a trading powerhouse. Most-favored-nation status gives China the same low tariffs as most other U.S. trading partners.

“If we don’t continue to be aggressive and work with China on a day-to-day basis and, in fact, insist that they adhere to the same norms as the rest of the major nations . . . who have access to our market, then, yes, we’re going to create a problem for ourselves,” he said.

Kantor said he met with China’s ambassador to the United States on Thursday and engaged in a “very candid discussion” of trade issues.

In Friday’s breakfast session at The Times’ Washington Bureau, Kantor complained about China’s refusal to abide by international rules governing intellectual property rights. He cited in particular the rampant production of bootleg versions of Western music.

“They don’t protect intellectual property,” Kantor said. “They have 26 plants in southern China which last year produced 75 million compact discs, only 2 million of which were consumed in China--73 million were exported.”

The piracy problem extends to “computer software, computer hardware, pharmaceuticals, you name it,” he said.

Kantor’s remarks contrast with those of Commerce Secretary Ronald H. Brown, who said last month that the renewal of most-favored-nation status would help shrink or even eliminate the United States’ growing trade deficit with China.

In 1993, the United States logged a $23-billion deficit with China, second only to the gap with Japan.

Meanwhile, Kantor said the Administration is beginning to rethink U.S. policy toward exports of U.S. cigarettes and other tobacco products. At a time when the tobacco industry is facing mounting pressure at home, it has seen international markets as an important source of future profits and growth.

But Kantor said the Administration already has reversed a Bush Administration policy by no longer opposing efforts by other nations to block sales of U.S. cigarettes because of local health and safety regulations. Before the policy shift, the United States objected to such obstacles on the grounds that they represented unfair trading rules.

Kantor said the Administration would not attempt to reverse such policies as long as U.S. brands are treated no differently from local tobacco products.