Japan Fires a Shot Over Bow of Clinton's `Managed Trade'

A government report blasts practices of US and others, but confesses, `We're all sinners in this trade policy area'

IF President Clinton comes knocking on Japan's door to demand a fixed market share for American goods, no one will answer.

That's the message made public today in a harsh government report that details the "unfair" policies and practices of Japan's top 10 trading partners.

Anticipating that Mr. Clinton may soon demand specific import quotas for some American high-tech products into Japan, the report warns that such tactics "do not simply violate international law, but harm the economic welfare of numerous economic entities - including the countries that employ them."

The report states that the United States, by advocating a results-oriented trade policy, is setting "itself up as both judge and prosecutor."

Mr. Clinton is due to visit Tokyo in less than two months, and this report by a high-level council of Japan's Ministry of International Trade and Industry (MITI) is the most public attack yet on the president's emerging trade policy.

Three weeks ago, US Secretary of Commerce Ron Brown said in Tokyo that Japan's huge trade surplus required that it accept results-oriented import plans.

But when asked what would happen if Japan refuses to go along and risks economic retaliation by the US, Mr. Brown responded that "This is not a time to use rhetoric that is threatening."

"I am confident that we can come to a conclusion and a solution, because reducing the trade deficit with the United States is not only in the best interest of the United States but in the best long-term interest of Japan," he said.

"There has been nothing that has been said to me to indicate that we cannot come to some kind of successful conclusion of our negotiations," Brown added.

Japanese officials, however, say they would appeal any attempt by the US to impose import targets to the multilateral trading organization known as the General Agreement on Tariffs and Trade, or GATT. They claim that import targets are "dangerous," because they indirectly discriminate against products of other countries. Japan has tried to win support from Asian and European nations against Clinton's embrace of "managed trade."

Japan has one other option as well, says Salomon Brothers economist Robert Feldman in Tokyo. "Should the United States insist on enforceable targets because of Japanese `peculiarities,' then Japan, as a condition of agreement, could reasonably insist on enforceable targets for correcting US `peculiarities,' " he says, such as high executive salaries, high health care costs, and an overbloated legal system.

LAST week, Clinton's trade representative, Mickey Kantor, listed six industrial areas for increased exports to Japan under an "industry by industry" formula: autos, auto parts, semiconductors, electronics, computers, and supercomputers.

"We seek mutuality of obligation and comparability of action," Mr. Kantor told the National Press Club in Washington, and will not tolerate "political, social, and commercial practices and attitudes" that choke the sale of US products and services in the Japanese market.

The MITI report depicts the US as one of the world's worst offenders in practicing "unfair" trade. This is the second year that Japan has issued such a report. One of its purposes is to counter the yearly report in the US that lists "unfair" trading partners.

Last year's report by MITI was criticized for not reporting on Japan's own trading practices. So this year, the report includes US and European Community's criticisms of Japan. "We are all sinners in this trade policy area," said a MITI official.

In a new assertiveness, Japan is more openly confronting the US on trade disputes. The Japan Automobile Manufacturers Association warned Treasury Secretary Lloyd Bentsen in a recent letter that setting higher tariffs on imported minivans would seriously harm bilateral trade relations and would be an "unequivocal violation" of international trade laws.

And MITI head Yoshiro Mori warned Kantor in a letter that the government will not force Japanese automakers to increase purchases of US auto parts to a target level. Clinton officials say President Bush extracted a promise from Japan's government last year to boost purchases of US auto parts from $9 billion last year to $19 billion in 1994. Mr. Mori says the procurement plan is a target "voluntarily set by the industry, not a public pledge."

The MITI report claims the US is "preoccupied" with trade results because it incorrectly links Japan's large trade surplus to the issue of "inadequate" market access for foreign goods. Rather, the surplus is more a problem of macroeconomic imbalances, the report says.

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