US Slaps $100,000 Tax On Japanese Ships In Latest Trade Dispute

The US Federal Maritime Commission on April 14 will begin charging ships from the three leading Japanese shipping lines an extra $100,000 every time they dock in the US.

The idea is to penalize them for Japan's cartel-administered ports, which the commission says are burdensome and costly.

The Japanese government agrees that its port procedures need reform, but objects to the surcharges, threatening to take the issue to the World Trade Organization.

The US is again putting trade and economics at the forefront of its discussions with Japan - imposing the port fines, griping about how much Japan exports, and even hinting that Tokyo shouldn't raise its national sales tax just now.

This diplomatic emphasis is all part of the global economy. The US and Japan together account for 40 percent of world production and 40 percent of world trade. They are each other's biggest trading partners.

For many years and with varying degrees of success, the US has tried to make it easier for American firms to do business here.

Japanese economic policy, since the end of World War II, has stressed protecting Japanese companies from competition at home so they can have a strong base for exports.

The Clinton administration shows no signs of abandoning its attempts to make Japan a friendlier place for foreign companies.

"It's obviously important that we continue pressing for market openness in order to be able to continue to support free trade in the States," says C. Lawrence Greenwood, the top economic diplomat at the US Embassy in Tokyo. "There's a fairness question that Americans understand quite clearly."

Washington's most pressing concern seems to be that foreign firms may be shut out of a Japanese economic recovery. The last really good year for the Japanese economy was 1990, but the government says a recovery is solidly under way.

Deputy Treasury Secretary Lawrence Summers visited Tokyo last week and urged Japan to make sure the recovery was based on expanding domestic consumption, not expanding exports.

In an export-led recovery, consumers in foreign countries finance the economic upswing. In a domestic-demand-led turnaround foreign companies get a piece of the action.

"Domestic demand growth is most compatible with the stability of the global economy and with avoiding a resurgence of the kind of trade friction we've seen in the past," Mr. Summers said.

A Japanese official responds: "The American side is still afraid of export-led growth, even though we are saying we would like a domestic-led recovery."

One complication is the recent strengthening of the dollar, which makes it easier for Japanese companies to export to the US. After months of decline, Japan's trade surplus with the US is again starting to swell.

In addition, Americans have criticized Japan's plan to raise the national sales tax from 3 percent to 5 percent on April 1 to slow deficit spending. Economists say this could choke off any economic recovery. Although no US government official has criticized the tax increase directly, In bilateral and international meetings, Japanese officials say they get the hint.

"Because of globalization ... you cannot separate individual countries' economic policies," sighs the Japanese official. "But still the sovereignty issue remains. The question is how to strike a balance."

Washington is pressing a number of trade issues. The US Trade Representative's Office has filed a case with the World Trade Organization alleging unfair practices in Japan's market for film and photographic paper. President Clinton wants an "open skies" agreement to replace treaties that limit passenger flights.

The Japanese dispute US charges, contesting the WTO case and asserting that the US photo market is also unfairly restrictive. Tokyo also questions the value of the "open skies" approach and airline deregulation, preferring more specific agreements.

The Japanese government says it is in a bind on port practices, since the ports are administered by a quasi-independent body called the Japan Harbor Transportation Authority (JHTA). Its chairman is considered the ruler of Japan's ports and acts as an intermediary between shipping companies and the unions that represent dockworkers.

The Japanese government says the administration of the JHTA is a private-sector affair, even though the government Transport Ministry licenses the association.

A US official involved in trade matters says it is appropriate for the Federal Maritime Commission to impose fines on Japanese shippers, since their subsidiaries belong to the JHTA. "They are very much tied up with the system," he says. "The surcharges," he adds, "are aimed at mirroring the effect of this system on our shippers in Japan."