U.S.-JAPAN TRADE ACCORD : International Business : NEWS ANALYSIS : Giving It a Rest : U.S. Likely to Resolve Other Trade Issues More Quietly

In an effort to resurrect its battered transpacific alliances, the Clinton Administration is likely to move into a less confrontational posture to resolve some of its other outstanding trade disputes with Japan, trade experts and economists said Wednesday.

Gary Hufbauer, a senior fellow at the Institute for International Economics in Washington, predicts the U.S. and Japanese governments will include an unwritten “peace clause” in their auto agreement as a way of easing some of the tension that was threatening to spill over into other parts of the bilateral relationship.

“My guess is that there’s some sort of tacit agreement to give it a rest,” he said. “This has just been tremendously stressful in terms of undermining the security relationship and other issues.”

With the auto dispute out of the way for the moment, the U.S. government must now turn its attention to other areas of contention with Japan, including deadlines for action on a bilateral aviation dispute and a global agreement to open up the financial services sector.

There are two front-burner issues: The U.S. Transportation Department recently threatened to impose sanctions on two Japanese cargo carriers next month if Japan doesn’t approve a series of route expansions for Federal Express, the U.S. air cargo company.

And Eastman Kodak Co. has filed a complaint with the U.S. government charging the Japanese government with helping Fuji Photo Film Co., Japan’s leading film company, to maintain a virtual monopoly in the Japanese film market by controlling the country’s four largest film wholesalers and stamping out price competition among distributors. Japanese government officials and Fuji deny those charges.

But even with the clock ticking, Hufbauer and others predict the Clinton Administration will try to resolve those disputes in a quieter and less publicly confrontational fashion.

Otherwise, they said, the United States could undermine the effectiveness of such groups as the World Trade Organization and the Asia-Pacific Economic Cooperation forum, both of which are designed to reduce trade barriers.

President Clinton was a major backer of both organizations. APEC is scheduled to meet this November in Osaka, Japan, to work on a model for the development of a regional free trade zone.

“This whole APEC thing is endangered unless our two countries can speak together more like adults instead of little children on the playground,” said Phillip Jones, a Japanese trade expert based in Seattle.

Greater civility doesn’t mean, however, that common ground will be found more easily in those disputes.

“These will be very tough areas to get an agreement in, and I don’t think that having negotiated this particular agreement will influence how the others turn out,” said Robert Lawrence, a professor of international trade and investment at Harvard’s Kennedy School of Government.

Federal Express, which is at the center of the aviation dispute, is hoping that Wednesday’s agreement bodes well for a resolution of their 2-year-old battle with the Japanese government. “If they were able to achieve a resolution on that case [the auto dispute], then we’re certainly encouraged that our case would be resolved quickly,” said Tom Martin, a spokesman for the Memphis, Tenn.-based cargo carrier.

At the very least, the top U.S. trade negotiators are now freed up to turn their attention to the FedEx case and other pressing issues.

The United States argues that a 1952 bilateral aviation agreement gives Federal Express the right to add as many flights as the carrier wants “beyond” Japan to other parts of the world. The Japanese government has refused to approve the Federal Express route expansion from Japan to the Philippines and other Asian cities, arguing that the bilateral agreement is unfair and should be renegotiated.

Even if the cargo sanctions go into effect, Jones predicts the two sides will return to the negotiating table and try to resolve the dispute out of the public eye. But he predicted the U.S. government will face a tough battle in Japan because the same entity--the Ministry of Transportation--oversees the aviation agreement and the auto inspection system.

“That’s going to harden the stance on both sides,” he said.

Lawrence Krause, an Asian expert at UC San Diego, predicts Wednesday’s agreement may embolden other U.S. companies to approach the U.S. government with complaints of barriers overseas.

In the Kodak case, experts were saying before Wednesday’s auto agreement that the U.S. government was likely to press ahead against the Japanese. Now, they say, U.S. officials may be emboldened to take an even tougher stance.

But Krause argues that in most cases, the United States is much better off pursuing these issues through multilateral organizations such as the World Trade Organization to avoid alienating other important trading partners in the region.

The Clinton Administration’s use of the trade sanctions in the auto dispute drew sharp criticism from European and Asian governments concerned that the same strategy could be turned against them.

“If you want true trade liberalization, you ought to do it on a regional basis,” he said.

The U.S. government is pushing other Asian nations, including Japan, to sign onto a global agreement to deregulate their financial services sectors. But Krause said a Friday deadline on that agreement will be difficult to meet, given the problems facing countries such as Japan, whose banking system is on the verge of collapse.

The U.S. government could chose to extend the deadline to give other countries some breathing room or accept the offers presently on the table and deny trade benefits to those countries whose proposals are found lacking.

“There are countries, Japan’s one, Korea’s another, that will have a hard time opening their markets because it could bankrupt their existing financial institutions,” Krause said. “One has to be pragmatic.”

MORE U.S.-JAPAN COVERAGE

* U.S., Japan reach auto accord. A1

* Assessing U.S.-Japan relations. A1

* Clinton might score politically. A6

* Luxury car dealers rejoice. A7

* Jury is out on Mickey Kantor. A8

* Japan’s Hashimoto a likely winner. A8

* Help for U.S. auto parts makers. D3

* Japanese: Don’t expect too much. D3

* The agreement, possible pitfalls. D3