Dollar Sinks Further Amid Festering Trade Impasse : U.S. Reports ‘Very Little Progress’ in Talks With Japan
Trade negotiators have made “very little progress” toward prying open the Japanese market to U.S. auto makers, leaving the prospect of trade sanctions looming on the horizon, a senior Clinton Administration official said Friday.
“While clearly there is some room for agreement, the fundamental differences and the fundamental issues remain,” the official said in an interview. “This is an impasse. . . . None of us is very optimistic.”
As portrayed by the official, who spoke on the condition of anonymity, the talks this week produced no significant movement across the spectrum of issues--involving access to dealerships, sales of parts for existing vehicles, and voluntary agreements to purchase more new car parts.
While the negotiations are at least several weeks away from a still-unannounced deadline, “the Japanese know they are running out of time,” the official said. The talks are scheduled to resume Monday afternoon at a more senior level involving Deputy Undersecretary of Commerce Jeffrey E. Garten and Ira Shapiro, a deputy U.S. trade representative.
The negotiations are complicated by such factors as the turmoil in currency exchange markets that has seen the value of the dollar plummet more than 15% this year against the yen, political pressures in Washington, and a long history of brinkmanship between the two commercial partners.
These talks differ from previous auto talks because the steep imbalance in U.S.-Japanese trade is thought to play a role in the fall of the value of the dollar against the yen. At the start of the year, the dollar was being traded at roughly 100 yen, but now it fetches no more than about 84 yen.
Last year, the two-way trade balance was $65.7 billion in Japan’s favor, with roughly 60% of that attributed to Japan’s sales of automobiles and auto parts in this country. It was offset by only extremely limited purchases of U.S. autos and parts. Overall, Japan ran up a $121-billion trade surplus with the rest of the world.
In an interview with CNN on Thursday, President Clinton avoided any finger pointing on the subject of the dollar, but he said it had dropped in value since Republicans became the majority in Congress in January.
“I have no idea what is happening in the markets with the dollar, and neither does anybody else in power,” he said. “You ask a lot of people who make a living doing this, (they) think it’s maybe speculation.”
But economists, watching anxiously as the dollar has sunk lower by the week, have been quick to cite the Japanese trade surplus as one of the key factors driving it down, because the imbalance in two-way commerce has turned Japan into a storehouse of dollars.
The need to reverse the imbalance, and bring value back to the dollar, has added to the pressure to reach an agreement.
Then there is the unresolved question of a deadline: The Administration has made it clear it will move up, possibly to as early as sometime in May, a Sept. 30 deadline for reaching an agreement. But such a step is not likely to occur until after U.S. Trade Representative Mickey Kantor meets with his counterparts from Japan, Canada and the European Union at a scheduled trade conference near Vancouver, B.C., on May 4 and 5.
“The Japanese know we consider that a very important meeting,” the senior official said.
If the new deadline is not met, the Administration is prepared to unveil trade sanctions that could add billions of dollars to Japan’s cost of doing business in the United States, already made steeply more costly by the escalating value of the yen. “There are a number of possible options from which to choose,” the official said.
A third factor is the political pressure being exerted on the Administration. Two candidates for the Republican presidential nomination, Sens. Bob Dole and Richard G. Lugar, wrote to President Clinton reminding him of the importance of opening Japanese markets to U.S. manufacturers.
The greatest obstacles in the talks involve the access U.S. auto makers have to the network of Japanese dealerships and Japanese safety regulations that U.S. negotiators say create nearly insurmountable hurdles for U.S. auto makers. Negotiators also are striving to establish criteria and standards for data collection that would enable both sides to measure progress in achieving a more open market.
On the question of dealerships, the United States is seeking to get Japanese auto dealers to sell American vehicles alongside Japanese cars and trucks. The local dealers have fought the change because, they say, Japanese manufacturers may will seek retribution for the increased competition.
The dispute over the sale of parts for vehicles already on the road, the so-called after market, involves “a very substantial philosophical difference between the way we want to approach it and the way they approach it,” the U.S. official said.
This is because the Japanese have argued that the sale of every part comes under government safety regulations, requiring detailed inspection, unless it can be proven that the part does not involve safety considerations. The United States wants to remove such regulations, unless it can be proven that a part is involved with safety matters.
