U.S. readies ultimatum to Japan over auto trade

April 13, 1995|By New York Times News Service

WASHINGTON -- The Clinton administration, frustrated by nearly two years of fruitless negotiations with Japan over U.S. autos and auto parts, will warn Tokyo that it will move to impose several billion dollars in punitive tariffs unless major progress is made in opening Japanese markets in the next three weeks.

The strategy, which has been under formulation for several weeks, was approved at the White House yesterday during a meeting of top Cabinet officers and other officials dealing with trade, senior officials said.

The highly confrontational approach has been hotly debated within the government, in part because of fears that it could poison relations just as the two countries are attempting to use the 50th anniversary of the end of World War II to stress a "global partnership."

Administration officials clearly have a strong motive to disclose -- and perhaps inflate -- their resolve to move to sanctions, in hopes that the threat will make the punishment unnecessary. But many officials say they have a feeling that a major confrontation is in the offing because Japan has drawn the line on trade concessions in the auto area.

The sharp fall of the dollar against the Japanese yen also has persuaded several top administration officials that they can no longer afford to wait.

U.S. officials have already told the Japanese that broad market openings are one of several steps needed to bring the currencies back into line, and that theme is expected to be hit hard this weekend, when Treasury Secretary Robert E. Rubin meets his Japanese counterpart, Masayoshi Takemura, in Indonesia at an annual meeting of Asian finance ministers.

The United States has complained that the Japanese systematically buy their auto parts from Japanese companies in which the Japanese automakers frequently hold an investment, and that Japanese auto dealers are not permitted to carry imported cars without the permission of Japanese manufacturers.

The administration also contends that extraordinarily high costs

make foreign investments in dealer networks difficult and that Japan places high custom-clearance costs on imported vehicles.

Only in the last two years, however, have U.S. companies begun offering a variety of cars with steering wheels on the right side, which are used in Japan.

And over the last 20 years U.S. companies were reluctant to invest in parts plants and auto factories when it would have been much less expensive.

Japan also has charged that the United States is using exchange rates as a weapon to force Japanese bureaucrats and business executives to agree to a broad range of policy changes. Mr. Rubin has denied the assertion.

The next negotiating session on auto issues, which account for more than half the merchandise trade deficit, is scheduled to begin Monday in Washington.

An administration task force has already been established to draw up a list of Japanese products that would be subject to 100 percent tariffs unless Japan takes what one senior official yesterday called "enormous leaps" during meetings scheduled over the next several weeks.

Several officials said the list of products would be announced at the beginning of May and would go into effect 30 days later unless an accord was reached.

The same tactic worked in negotiations with China earlier this year over the protection of U.S. copyrights and trademarks and resulted in a last-minute agreement.

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