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This Time, Chip Accord With Japan Came Easily for US

By Peter EnnisSpecial to The Christian Science Monitor / June 12, 1991



NEW YORK

RANCOR, threats of sanctions, and last-minute concessions are the norm in United States-Japan trade disputes, but the new semiconductor pact the two countries signed June 11 broke the pattern. Negotiations finished quietly two months before deadline. A key factor in the smooth outcome was the collaboration of America's computer and semiconductor industries.

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After years of bitter squabbles, the two industries late last year adopted a unified position on trade with Japan, which government and industry officials say caused the Bush administration to adopt a firm negotiating stance.

"The agreement between the computer and semiconductor industries was an extremely important factor in the administration's decision to proceed with extending the agreement," says Don Phillips, assistant US trade representative.

Japanese negotiators lost the opportunity to capitalize on differences in the US business community and press for a softening of American demands. "The Japanese saw the American industry united and the US government united, and decided to get the issue behind them," says Michael Maibach, government affairs manager for Intel Corporation, a leading US chipmaker.

By contrast, US-Japan negotiations for the construction market access agreement reached last month were mired in animosity. Japan resisted US demands. The Bush administration threatened sanctions. Fearful of losing business, large American contractors operating in Japan pressed the Commerce Department to water down its demands, and a deal came only at the eleventh hour.

Before the US computer and chip industries came together, the semiconductor dispute seemed destined to travel a similar path.

The 1986 US-Japan semiconductor agreement, which the new pact replaces, was designed to protect American chipmakers against computer memory chips "dumped sold at unfairly low prices - in the US by Japanese firms, and to help them get access to the Japanese market.

US computermakers criticized the deal for creating shortages of Japanese-made semiconductors. Many economists also criticized the pact for violating free-trade principles by specifying a 20 percent market share in Japan for foreign-made chips.

Japanese negotiators insisted the 1986 agreement did not contain a firm commitment on market share, but the Reagan administration in 1987 imposed sanctions against Japanese electronics products after US market share in Japan failed to rise significantly.

With so much controversy surrounding the 1986 pact, the Bush administration as late as last October had not decided whether to seek extension.

But the computer companies, wary of the lobbying power of the Semiconductor Industry Association (SIA), feared the administration might agree to a new accord harmful to their interests. The chief executives of top computer firms met in Washington in late 1989 and formed the Computer Systems Policy Project (CSPP), an association of 11 companies. They also decided to seek a deal with the chipmakers that would benefit both industries.

"Without the dialogue we would potentially have been victims again," says Robbins Pancake, international trade manager for computermaker Hewlett Packard.

The outlines of a deal emerged from a highly unusual meeting in early 1990 between top executives of leading computer and chip companies. Computermakers agreed to back a 20 percent market share in Japan for foreign-made chips, and the SIA agreed to major revisions in the antidumping provisions of the old pact. The deal was finalized in a telephone conference involving at least eight chief executives late that summer.

Shortly after CSPP and SIA announced their deal, disagreements within the Bush administration over the 1986 pact were ironed out, and the cabinet decided to seek extension.