U.S.-Japan trade talks enter last-ditch phase

September 28, 1994|By New York Times News Service

WASHINGTON -- Japanese and U.S. negotiators engaged in a high-stakes economic duel yesterday, with Japan insisting that it would make no more trade concessions to Washington and the Americans insisting that they would hit Tokyo with trade sanctions if more concessions were not forthcoming.

The Clinton administration's confrontation with Japan, remarked one U.S. official, is the economic equivalent of its confrontation with Haiti, with only one major difference: "This is really important."

As it did with Haiti, the Clinton administration has spent more than a year trying to find a negotiated solution with Japan, and, as such a solution remained elusive, the administration gradually introduced the threat of force in the form of trade sanctions.

Now that the talks are in the endgame, President Clinton finds himself in a position where either he will persuade the Japanese to make the concessions he is seeking by Friday, or he will have to carry out his threat to initiate punitive tariffs against Tokyo on Saturday. If Mr. Clinton backs down, his credibility in economic warfare will be destroyed.

At this late stage, it is impossible to tell who will blink first. Both sides have enormous economic incentives to avoid a confrontation, but they also have enormous economic and political stakes in not backing down.

The betting within the administration and among the Japanese is that some sort of compromise will be found in which the two sides will reach agreement in some areas and the United States will apply small sanctions in areas where it gets no satisfaction from Tokyo.

Such an outcome could allow the administration to reap at least some benefit from the last 14 months of negotiations, while imposing trade sanctions that are just enough to preserve its credibility but not enough to disrupt currency markets.

The Clinton administration is as divided on the question of using economic force against Japan as it was on using military force against Haiti.

On one side is the use-of-force camp -- primarily the Commerce Department and the U.S. trade representative's office. Their argument goes like this: If the history of American-Japanese trade negotiations teaches anything, it is that the Japanese will never make concessions except under extreme pressure.

On the other side of this argument are the Treasury Department and some White House economic advisers. These officials say that while Japan should lower its trade barriers, imposing trade sanctions on them if they don't would have disastrous consequences in financial markets. The markets, they say, will take any U.S. trade sanctions against Tokyo as a sign that the Clinton trade policy has collapsed and that the administration's only option will be to rely on a weak dollar and strong yen to address Japan's $60 billion trade surplus.

This school tends to take the long view that Japan's over-regulated, over-protected economy is already falling behind on many of the technologies of the 21st century, from software to high-definition TV. Their attitude is to let the Japanese choke on their own regulations.

Japan's Trade Minister Ryutaro Hashimoto flew to Washington yesterday to take part in the last-minute talks. Before leaving he declared, "I have no intention of making any new proposals or changing Japan's current position."

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