Japanese worry that US plans for North American trade bloc could radically change long-standing ties

MASTERS of silk-making that they are, the Japanese know a cocoon when they see one. And right now they see an ailing United States spinning itself some protective covering.

In Tokyo's eyes, the US wove its first threads with a free-trade pact that binds it closer to Canada. The three-year-old agreement has already led to one case of discrimination against a model of imported Japanese car.

In a few weeks, the White House will formally ask Congress to approve an agreement with Mexico that would create a North American Free Trade Zone. The few details released so far have raised some alarm in Japan. After NAFTA (the North American Free Trade Agreement), the US hopes to create a common market among all it Western Hemisphere neighbors.

By definition, a free-trade zone is exclusionary to those nations not included, says Yasuo Tanabe, director for North American trade policy planning at Japan's Ministry of International Trade and Industry. "NAFTA will reduce barriers only to insiders," he says.

What worries Japanese officials and exporters most of all is that NAFTA may look harmless at first, and may even spur trade and American competitiveness, as US officials insist. But it could also be a tremor before a quake, a free-trade zone that slowly transmogrifies into a protectionist trade bloc that keeps out "third nation" (read Japanese) competition.

Of immediate concern are requirements for "local content" in imported products, or a "rule of national origin." For NAFTA, the US took aim at Japanese automakers and raised the percentage of parts to be North American-made.

Up to now, Japan has muted its criticism of NAFTA, awaiting more details of the pact and hoping Congress might reject it. But Japan's inhibitions fell this week as it took its complaints to a Bangkok meeting of the Asia-Pacific Economic Cooperation (APEC) group. This new 15-nation group, which includes the US, is a budding trade organization of its own, formed mainly by Asian nations who worry that the European Community and NAFTA might become protectionist. While Japan is concerned that it might be shut

out of North America, Southeast Asian nations fear that Mexico will take US investment away from them.

Japan, which sees APEC as a potential fallback for its own regional bloc in case the world is divided into trade blocs, is seeking Asian support for its complaints that NAFTA might violate the rules of the global trade organization, the General Agreement on Tariffs and Trade.

Japan's complaint goes deeper. It sees the US, its only ally and main trading partner, having been relieved of its cold-war burden but frustrated by the reluctance of Europe and Asia to further liberalize world trade in the Uruguay Round of talks. Japanese leaders believe there may be no more free ride on a US that has been world champion of free trade and the free world.

"The American people are getting more inward-looking, and American policy may be getting more inward-looking, too," Mr. Tanabe says.

Japanese admit they are not blameless in the world's rush to regionalism. The nation's trade surplus looms ever larger. In the late 1980s, the US and Japan looked hard at forming a free-trade zone between them. But such zones are mainly aimed at tearing down barriers at the borders, such as tariffs and quotas.

Japan has hidden barriers, deep in its culture and bureaucracy, that resist many foreign products or services. It is a nation that can spot a fellow cocoon half a world away.

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