US to Crack Down On Japanese Cartels That Hurt Exporters

IN a marked shift of trade policy, with Japan as an obvious target, the United States is making it easier for prosecutors to take foreign firms to court if they block US business in their home markets.

This decision, announced by the Justice Department on Friday, stretches the long arm of US antimonopoly law into other countries in an attempt to stop collusive business practices, such as cartels, that eventually harm the American economy.

In the past year, the US has warned Japan that American companies are being barred in at least three markets - autos, plate glass, and paper goods - allegedly because of a common Japanese practice of tightly affiliated companies, known as keiretsu, acting together to exclude new-comers in ways considered illegal in the US.

By threatening prosecution of "unfair" practices abroad, the Bush administration is going far beyond any previous US trade tactic, such as political pressure and sanctions, to force trading partners to change their ways.

"This decision may be a new kind of disguised protectionism," said Yoshiaki Iizaka, a political science professor at Gakushuin University. "The US says it wants to stop unfair practices, but unfairness is a subtle, cultural difference."

The US judicial system will be asked to pass judgment on the anticompetitive actions of foreign firms, a move that Japanese officials, despite their recent interest in creating a "borderless" world, have criticized as an infringement on national sovereignty.

Specifically, the new policy removes a requirement, issued in 1988 under President Reagan, that the Justice Department must first prove that any alleged violation of antitrust laws has directly harmed US consumers. Now the department need only show that US exporters have been harmed by practices of foreign firms.

Also, the US will request the Japanese government to arrest any suspected violators of the US antitrust laws.

Officials in Tokyo have feared that the end of the cold war might bring about a tougher stance by the US against its competitors. At the same time, Japan has begun to advocate that its economic model, including tolerance toward cartels, has merit for developing countries.

Lately, the government has defended the close keiretsu relationships between Japanese firms as efficient and necessary to economic success, although with some flaws.

The timing of the US decision may have come out of rising US frustration at Japan's slow pace in restructuring its economy, especially keiretsu, even as its trade surplus continues to rise.

Also, Japanese officials worry that the US may be lessening its commitment to the multilateral trade system because of an apparent deadlock in the so-called Uruguay Round, the trade talks in Geneva aimed at setting new rules for global competition.

Since 1989, the US and Japan have agreed to recommend changes in each other economies in what President Bush calls an attempt to "level the playing field" in trade and investment. While the US has praised some Japanese changes, such as a lifting of barriers to large retail stores, the US is most critical of the government for not strongly implementing antimonopoly laws already on the books.

Last week's decision came just after the ruling Liberal Democratic Party (LDP) refused a request by the Japan's Fair Trade Commission (FTC) to increase criminal penalties against violators of the law. The FTC, which is supposed to implement the anti-monopoly law, sought to raise the maximum fine from 5 million yen ($37,878) to 300 million yen ($2.27 million). The LDP, which was heavily lobbied by the construction industry, agreed to set a fine of 100 million yen ($758,000).

The FTC, created during the American Occupation after World War II, was sidelined for decades by other government agencies for the sake of a creating powerful Japanese economy. Under US pressure, however, it has lately tried to shake off the image of being a "toothless watchdog."