Japan to open construction market

January 20, 1994|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau The New York Times News Service contributed to this article.

WASHINGTON -- The Clinton administration yesterday dropped its threat of trade sanctions against Japan after Tokyo agreed to open its public-construction program to bids from U.S. and other foreign contractors.

"This is an historic step forward," U.S. Trade Representative Mickey Kantor said yesterday, welcoming the breakthrough just 24 hours before the sanctions were to be imposed. "The Japanese have finally done what we have long urged."

But at the same time, Mr. Kantor signaled that increased pressure was being applied on Japan to open its markets to other U.S. imports in advance of a Feb. 11 summit here between President Clinton and Prime Minister Morihiro Hosokawa.

Under a trade "framework" established by the two countries in July, the Clinton-Hosokawa summit was set as the deadline for agreement on opening the Japanese markets for telecommunications, medical supplies and equipment, automobiles and auto parts.

"Little progress has been made in those areas so far," Mr. Kantor said at a Washington news conference.

Treasury Secretary Lloyd Bentsen, in Beijing to press the Chinese on trade liberalization and human rights, has been ordered by Mr. Clinton to Tokyo for trade talks with Prime Minister Hosokawa and Finance Minister Hirohisa Fujii.

U.S. and Japanese officials are due to reopen "framework" negotiations next week on reducing Japan's trade surplus with the United States. Monthly trade figures released by the Commerce Department yesterday showed Japan's exports to the United States in November were worth $5.7 billion more than its imports from the United States.

Under the construction agreement announced yesterday, U.S. companies will be allowed to bid for contracts on major Japanese government building projects, a sector that is rapidly expanding as Japan seeks to stimulate its moribund economy through public spending.

"The money is big," said Allen Shiau, senior vice president of the world division of WEFA, a Pennsylvania economic forecasting group. He estimated that Japan's public works program was worth $100 billion for fiscal 1994 and said it was likely to be expanded next year as the government tries to spend its way out of the economic doldrums. According to U.S. trade officials, up to $20 billion worth of projects will be open to foreign bids annually.

"This really changes the spirit of Japanese policy," said Mr. Shiau. "They are willing to adopt more concessions to the U.S. It's very, very significant."

The new procedures, which will go into effect April 1, will open any government construction project worth at least $7.69 million to competitive international bidding, replacing a system of closed bids by designated contractors who were mainly Japanese.

It will end the need for foreign companies to enter joint ventures with Japanese partners to submit a winning bid and will give weight to the international experience of overseas contractors.

"All of these things work together open up a market," said Mr. Kantor.

The agreement, however, targeted no specific market share of the construction sector for foreign contractors, despite earlier U.S. insistence that Japanese market access should be subject to both quantitative and qualitative measurement.

Mr. Hosokawa, in a reply to an open letter from American economists, has reiterated his opposition to setting targets for opening Japan's markets.

"I was very gratified and encouraged to note in your open letter that your opposition to managed trade coincides with our views," Mr. Hosokawa wrote in his letter, dated Dec. 27.

In September, about 40 economists and Japan experts, mainly from the United States, signed an open letter to Mr. Clinton and Mr. Hosokawa, saying that "U.S. demands for managed trade are misguided."

The release of Mr. Hosokawa's reply yesterday was part of a campaign by the Japanese government to show that top politicians in Japan, not only its bureaucrats, were opposed to the American demand in current trade negotiations that quantitative benchmarks be set.

Asked yesterday about the absence of any target numbers from the construction agreement, Mr. Kantor said the sector was "more susceptible to regulations and changes in procedures" than to numerical measurement.

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