NEWS ANALYSIS : U.S.-Japanese Trade Could Be Headed for Uncharted Territory

U.S. Trade Representative Mickey Kantor chortled at the suggestion that a trade war with Japan is on the horizon.

“We haven’t had a trade war in the world since 1932,” he said. “I don’t expect there’ll be a trade war. . . . I think we have an annoyance and an irritant.”

That was Wednesday. He had just announced that the United States was driving up the stakes in its campaign to open the huge Japanese market to automobiles and auto parts made in the United States, and he was trying to calm the waters.

But by Thursday, it was clear that the White House had taken an unprecedented step into the unsettled and high-pressure world of international economics, embarking on a course that may finally push the crucial U.S.-Japanese trade relationship, often marked by last-minute retreats from the brink, into uncharted territory.

“This is as likely as not to be carried forward,” said Claude Barfield, a trade expert at the American Enterprise Institute, a conservative think tank. “The Japanese will see it through and not cave in.”

The immediate stakes in this poker game can be reduced to a simple parallel: the sales of Oldsmobiles in Osaka and the price of a Lexus in Long Beach.

But at a dicey period in the life of the global trading and financial system, there is concern that the United States is saddling an ornery trade dispute with many other issues, including U.S.-Japanese cooperation on the dollar’s value and even the willingness of China’s and other fast-growing economies to maintain a course toward free trade.

On Wednesday, Kantor started an informal clock. Unless breakthroughs are achieved within a little more than a month, the United States will place punishingly high tariffs, or import taxes, on Japanese products--most probably luxury automobiles and certain auto parts, and possibly minivans and certain four-wheel-drive vehicles. A detailed list is likely to be made public early next week.

The White House also served notice that it will take its complaint against Japanese auto trade practices to the new World Trade Organization. Japan has said that it, too, will seek relief from the international trade body if it is faced with sanctions that would price its top-of-the-line models out of the U.S. market.

Japan’s willingness to suffer sanctions rather than reach a compromise would send a signal that Tokyo sees its economic future lying more in Asia than in the United States. By shifting focus to partners closer to home, Japan would also be better positioned to resist U.S. pressure to support creation of a massive free-trade zone across the Pacific by the second decade of the next century.

At the same time, the Clinton Administration is voluntarily walking into the untested territory of the WTO. The United States is asking the trade panel to referee its first complex and controversial case, even as the Administration is slapping high tariffs on Japan--just the sort of unilateral action the new organization is supposed to avert.

The tension in the two countries’ relationship will make each of the points of contact that much more difficult--beginning with the meeting of the largest industrial democracies next month in Halifax, Nova Scotia.

The Administration is looking to the meeting--at which President Clinton and Japanese Prime Minister Tomiichi Murayama will be joined by the leaders of Canada, Britain, France, Germany and Italy--as one last chance to resolve the dispute.

“The fact is, the world is sort of a trembling world right now,” said William Brock, a U.S. trade representative during the Ronald Reagan Administration. “The financial markets are volatile. The dollar’s extraordinary fall has got a lot of people nervous.

“I don’t think we need this kind of a conflict right now. It is a time that requires more tact and more patience and less big public statements,” he said.

“I think it’s dangerous,” Brock said, “and the potential exists for it to become larger than a two-country problem.”