TIME: Almanac 1993/TIME Almanac 1993.iso/time/030590/0305006.000

Text File | 1992-08-28 | 6.1 KB | 140 lines

                                                                                WORLD, Page 30

JAPAN

After the Sake, the Prickles


The winning Prime Minister's first test: relations with the U.S.

By BARRY HILLENBRAND/TOKYO -- With reporting by J.F.O.
McAllister/ Washington


    Victories are best savored slowly, but Prime Minister
Toshiki Kaifu barely found time for the customary postelection
rituals last week. No sooner had he hammered open a keg of sake
to celebrate his Liberal Democratic Party's renewed majority
in the lower house of the Diet than he confronted a formidable
problem: Japan's strained relations with the U.S.

    Not only the perennial bane of the U.S.-Japan trade
imbalance but also a widening array of other economic conflicts
threaten to poison the relationship over the coming months.
During the election campaign that ended with balloting on Feb.
18, Washington muted its complaints about Japanese economic
practices. Within hours after the scandal-shaken L.D.P. won a
healthy victory, taking 275 out of 512 lower-house seats, the
steady tattoo began again. "Kaifu is determined to deal with
these problems," says a Tokyo bureaucrat. "They are on the top
of his agenda."

    And of Washington's. Four days after the vote, a mission
headed by Deputy U.S. Trade Representative S. Linn Williams
began a third round of talks known opaquely as the Structural
Impediments Initiative (SII). The complex negotiations, which
began last September, are aimed at resolving the trade issue
by reshaping fundamental structural aspects of the Japanese and
American economies.

    On the U.S. side, diplomats are urging the Japanese to
increase public spending, streamline the country's local
distribution system for goods, and strengthen antimonopoly laws
to give foreign products easier access to Japanese markets. The
Japanese want the U.S. to promise to trim its budget deficit
and significantly hike the national savings rate, thus reducing
the demand for Japanese imports and bolstering American
corporate competitiveness. An interim report on the talks is
due by April.

    An equally prickly issue is the so-called Super 301 dispute
between the two countries. Within the next few months U.S.
Trade Representative Carla Hills must decide whether to impose
sanctions against Japan under Section 301 of the U.S. trade
law, adopted in 1988 to give Washington more leverage in prying
concessions out of countries with allegedly unfair trade
practices. Last May Japan was specifically cited for
restricting sales of forest products, satellites and
supercomputers. Tokyo claims that Super 301 sanctions violate
international rules governing fair trade, and declines to
negotiate the substance of the disputes under the threat of
such penalties.

    Even if the SII talks are a success, there is growing
concern on both sides of the Pacific that strains run deeper
than the trade deficit. In the past two years the deficit has
narrowed by 13%, shrinking from $52 billion in 1987 to $45
billion in 1989. American exports to Japan jumped from $31.4
billion in 1987 to $48.1 billion in 1989, a 53% increase.
Timberland shoes and Procter & Gamble soaps are becoming
popular consumer items across the Pacific.

    Polls indicate, however, that irrational suspicion of Japan
is growing in America, fueled in part by Japanese purchases of
prominent U.S. companies and real estate and by a sense that
America is falling further behind in the technology race. Says
a State Department expert: "We could knock down every trade
barrier there is and cut down our trade deficit to zero, but
we still must face this issue that we believe Japan is becoming
the dominant economic power, and we're losing our ability to
cope."

    The L.D.P.'s election win may help with several of the
immediate problems. The Liberal Democrats are perceived as
being more willing to compromise with the U.S. than Japan's
opposition parties, which espoused more protectionist policies
to favor farmers and small shopkeepers. The voting outcome may
also be useful in strengthening the position of Kaifu, whom one
Washington-based diplomat calls a "very healthy influence" on
the U.S.-Japanese relationship. This week Kaifu will attempt
to smooth relations with the U.S. when he makes a hastily
scheduled trip to California to meet with President Bush.

    A relative political unknown without a strong base in the
L.D.P., Kaifu, 59, was named Prime Minister in a moment of
desperation last August. The party had just suffered an
embarrassing defeat in the upper-house election, and was
plagued by scandals involving everything from tainted stock
dealings to a loquacious mistress of a previous Prime Minister.
Now that the Liberal Democrats are out of danger, Kaifu's
rivals within the party would like to replace him. They belittle
his foreign policy experience and claim he cannot tackle
problems of the magnitude of the U.S.-Japanese friction. Kaifu
is keenly aware that his longevity in office may depend on how
well he handles the strained ties -- and that is no small
incentive.


____________________________________________________________
POINTS OF FRICTION


    1. Japan and the U.S. have resumed talks on adjustments to
ease the American trade imbalance. Japan wants the U.S. to
boost its savings rate, improve education, and lower the budget
deficit. The U.S. wants Japan to change its distribution
system, increase foreign access to consumer markets, and revise
antimonopoly laws.

    2. Japan has been cited by the U.S. under the 1988 Omnibus
Trade Act for unfair trade practices in the areas of forest
products, satellites and supercomputers. If the disputes are
not settled, the U.S. Trade Representative can impose
sanctions.

    3. Negotiations on important trade issues like shipbuilding,
telecommunications, protection of intellectual property, and
access to Japanese construction contracts will reach a climax
in the next few months.

    4. The Japanese are worried that Washington might move to
limit their investment in the U.S., especially the purchase of
existing assets.