US, Japan parry and thrust on trade. Struggling with a growing trade deficit, US sees little relief in Japan move

By , Staff writer of The Christian Science Monitor

A huge tide of red ink is washing over United States trade accounts, angering members of Congress and prompting action by the Japanese government. Yesterday Japan announced 87 steps it will take to improve foreign companies' access to its home market. The package was unveiled with the clear hope of defusing growing protectionist sentiment in Congress.

But the initial reaction to the latest Japanese steps from US government and industry has been lukewarm at best. And economists expect the measures to have little effect on the US merchandise trade deficit, which surged to a near-record $13.4 billion in June, according to new Commerce Department figures.

The deficit figures have a human impact. As a rule of thumb, ``for every $10 billion you add to the annual trade deficit, you lose about 250,000 jobs,'' says David Wyss of Data Resources Inc., an economic consulting company.

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The deficit tracks the difference in the dollar value between what American companies sell abroad and the cost of the foreign goods US citizens purchase. In June alone the US had a deficit with Japan of $4.6 billion.

When the economy is expanding, a growing trade deficit means the nation does not create as many new jobs as it otherwise would. When the economy is contracting, an expanding deficit means existing jobs are lost. The current trade deficit ``is the difference between a 5 percent unemployment rate and a 7.3 percent rate,'' Mr. Wyss says.

Because of a strong dollar, the US is running large trade deficits with many of its trading partners. In June, the deficit was $2.6 billion with Western Europe, $1.7 billion with Canada, and $1 billion each with Taiwan and the Organization of Petroleum Exporting Countries.

But the US trade imbalance with Japan, which totaled $36.8 billion last year and could hit $50 billion this year, is the largest and most politically explosive. Congress has reacted by filing a flood of bills -- 86, by one count -- designed to restrict Japanese imports.

Commenting on the Japanese trade liberalization package, White House spokesman Larry Speakes said, ``It is difficult to determine from the announcement whether the program will remove the bulk of these barriers in a timely fashion. So we must reserve judgment until the effects of the program on our exports is realized.''

Mr. Speakes noted that some provisions would not become effective for three years and added that action ``in a more timely fashion would be more beneficial to US-Japanese trade relations.''

Reaction from Congress was even cooler. ``I hope the new announcement amounts to something, but I must say I am skeptical,'' says Sen. John Danforth (R) of Missouri, chairman of the Senate Finance Committee's subcommittee on international trade. Senator Danforth renewed his call for legislation ``insisting on results and imposing penalties on Japanese products if results are not forthcoming.'' The senator recently introduced a bill that would do just that.

The Japanese ``are clearly getting the message from the Hill that there is a real problem and they are [making] every effort'' to correct the problem, says Harry Westbay, manager of the US Chamber of Commerce's international policy department.

Lawrence A. Fox, vice-president of the National Association of Manufacturers, says the package does not go much beyond the measures the Japanese announced two months ago. ``Most important, they haven't done anything about the exchange rate,'' he says. If Japan were serious on the exchange-rate question, he says, it would impose tax exports and use the proceeds to spur imports.

US economists expect little effect on the US trade deficit from Japan's plan. Over three years, the plan would lower some tariffs, ease certification for imports, and allow greater foreign participation in setting standards for products.

According to Commerce Secretary Malcolm Baldrige, the merchandise trade deficit for all of 1985 will reach $140 billion to $150 billion, compared with last year's record deficit of $123.3 billion.

As long as the yen remains at its current weak level vs. the dollar, ``even if there were no trade barriers we couldn't sell any appreciable amount of goods to Japan,'' Wyss says. ``There is no way'' American goods in large numbers can penetrate the Japanese market at current exchange rates, the NAM's Mr. Fox adds.

The Japanese government said it ``welcomes a stronger yen'' and would take steps, including removal in 1987 of interest ceilings on large certificates of deposit, toward that end. Removing interest rate ceilings would theoretically make Japan a more attractive place for foreign citizens to invest their money. To make such investments, foreigners have to purchase yen, thus putting upward pressure on the yen's value.

The reasons for the surge in the deficit in June, government analysts said, were an 8.1 percent jump in the value of oil imports and a pickup in the imports of foreign goods, including Japanese cars. CHART:US trade trouble spots

US trade deficit

for June

Japan $4.6 billion

Western Europe $2.6

Canada $1.7

Taiwan $1.0

OPEC $1.0

Source: US Commerce Department

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