Britain locks horns with Japan over trade

Britain has stepped up pressure on Japan to play fairer in international trade. The Thatcher government is threatening that unless the Japanese open wider the door of their financial market and give British traders, especially in telecommunications goods and services, a better share of contracts, sanctions will follow.

The threats were carried to Tokyo this past week by a junior trade minister, Michael Howard, who had talks with Japanese ministers that appear to have been only partially successful.

Two key points Mr. Howard made were:

If Japan fails to allow more British firms onto the Tokyo stock exchange, Britain will deny access to the City of London to Japanese banks and insurance companies.

If Japan refuses to give Britain's telecommunications concern, Cable and Wireless, a share of contracts, the British government will clamp down on Japanese telecommunications companies seeking access to Britain.

There are 29 Japanese banks and nine insurance companies operating in London. After long negotiations, only eight British firms have been allowed to enter the Japanese securities market, and only one bank - SG Warburg - has been admitted to the Tokyo stock exchange.

[Tokyo stock exhange President Michio Takeuchi says the exchange cannot admit new foreign members until it expands its premises. The expansion is due to be completed in 1988.]

The British government this past week adopted measures to exclude Japanese financial operators from London if nothing comes of Howard's week-long Tokyo mission.

Soon after, Howard returned from his trade talks in Tokyo concerned that he had failed to get the message through that there must be a better balance in British-Japanese trade.

After talks with the Japanese foreign minister, Tadashi Kuranari, he warned of ``an abrupt deterioration'' in British-Japanese trading if the British firm Cable and Wireless did not gain a larger share of telecommunications contracts in Japan.

Indications that Howard's talks with top Japanese officials were not going well came after the first day when the British government threatened that if Cable and Wireless's Japanese bid was frustrated, Britain would retaliate in kind.

The Thatcher government is taking a tough posture, partly out of frustration, partly in the knowledge that the United States is also impatient with what is seen as Japanese obstructionism.

According to official British statistics, Japan last year sold Britain about 1 billion of goods and services. Britain purchased slightly less than 5 billion worth in return.

[Japan, for its part, flatly denied London's contention that Britain's trade deficit with Japan has risen sharply. Citing statistics prepared by the Japanese Ministry of Finance, Tokyo officials asserted that Japan's surplus with Britain actually fell in 1986 by 24 percent.]

But Britain may have to tread carefully in considering sanctions against Japan. The Japanese have invested heavily in British industry; a sudden outflow of investment funds would lead to more unemployment.

Also, if there were curbs on new applications by Japanese banks to operate in London, the banks might go elsewhere in Europe where they would probably be welcomed with open arms.

Some reports are suggesting that Britain will give Japan six months to apply fairer trade standards. According to this formula, if nothing happens, sanctions would be adopted.

At the same time, US and British concern about Japanese trade practices appears to be spreading to Western Europe. In Brussels, where British Foreign Secretary Sir Geoffrey Howe discussed the trade issue with European Community (EC) ministers over the April 4-5 weekend, there is considerable concern about Japanese trading practices.

But the emphasis there is more on the impact of Japanese exports on Western Europe than on the Japanese shutting out European imports. In the first two months of this year, Japanese car imports to EC countries ran at about 32 percent of overall car sales in the Community.

The Europeans tend to deprecate Britain's talk of an Anglo-Japanese trade problem. They prefer to see it as an EC-Japan problem of which the British element is just one part.

But this does not cut much ice with the British, who have been rendered ultra-sensitive by the importance of the City of London as part of the London-New York-Tokyo international finance market.

The Europeans are worried about Japanese obduracy, and especially about an escalating trade war.

Sir Geoffrey told the House of Commons this past week that the EC partners had given ready backing to a fresh look at specific measures against Tokyo, but it seems that the Europeans were vague on specifics as to what should be done. -30-{et

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