Tempers Rising over Trade

By Christopher Byron

Washington insists that Japan open up its market to foreigners

Last year the battle was over automobiles and trucks. Now Japan and the other major industrial countries are heading for an even more serious collision. At issue this time is whether or not Japan's byzantine web of nontariff import barriers is really just disguised protectionism, and, if so, what should be done about it.

Two weeks ago high-level trade officials from the U.S., Canada, the European Community and Japan held two days of meetings in Key Biscayne, Fla. One of the messages of the session was a warning to Japan's Minister of Trade and Industry, Shintaro Abe, that his country must open its market to more imports. Abe replied that Japan would take "drastic" action before the end of the month to make it easier for the U.S. and other countries to sell their products in Japan.

Last week Abe jetted to Washington, where he heard the same story from President Reagan, Secretary of State Alexander Haig, U.S. Trade Representative William Brock and other top Administration officials. According to American estimates, the value of Japanese exports to the U.S. grew last year by 23%, to $37.7 billion, in part because of the strength of the U.S. dollar, which encouraged imports and discouraged exports. Indeed, American exports to Japan increased by only about 4%, to $21.5 billion.

Since taking office a year ago, the Administration has struggled to convince Japan that it must open up its domestic market to more foreign imports if it wants to head off tit-for-tat protectionism in the U.S. Progress has come slowly. With the U.S. economy now in a deepening recession that is sending unemployment leaping, calls for retaliation are rising just as the Administration had warned. Says Deputy U.S. Trade Representative David MacDonald: "I see a crisis in late spring or summer. The problem is the closed Japanese market itself. We are not talking about the Japanese restraining exports, we are talking about them opening up their own domestic market."

The complaints against Japan are also coming from the industrial nations of Western Europe, which have found their own trade with Japan tilting increasingly in Tokyo's favor. Says a top Common Market official in Brussels: "Of course the Japanese sense that something has to be done. But getting them to open up their markets is like starting a car with a flat battery on a cold winter's day. It grinds for a while, and then it just stops."

What angers U.S. and European officials is not the marketing prowess of Japanese exporters, but the complex regulations that hamper foreign businessmen in Japan. Examples abound. An American maker of aluminum baseball bats was developing a good market for his product until the Japanese softball association ruled that his bats could not be used in tournament play. Reason: the label stamped on them supposedly made them defective. Companies selling products in aerosol spray cans complain that their cans must be 25% thicker in Japan than anywhere else in the world. Moreover, the outfit that inspects the incoming aerosol products is a prime Japanese spray-can maker.

One reason that U.S. automakers last year sold only 7,742 cars in Japan (vs. Japanese car sales of 1.9 million vehicles in the U.S.) is a host of design and safety standards that force expensive changes in virtually every foreign-made car imported into the country. During the year, General Motors sold a total of only 612 Cadillacs in Japan, partly because changes in such items as headrests, safety reflectors and electrical wiring push the cost of a vehicle to more than $40,000.

Although the Suzuki government has pledged to chop away at some of the more egregious nontariff barriers, there are thousands of import restrictions that permeate life and society in Japan. Says one Japanese businessman candidly: "Consider the inspector who has been sitting at the dock in Yokohama saying no for 40 years. He is going to find it very hard suddenly to start saying yes just because some politician in Tokyo says it is the new policy."

Japanese officials correctly point out that at least some of the blame for lagging U.S. exports to Japan belongs with American businesses. Traditionally, U.S. companies have never felt a strong urge to export, since all the sales they needed could be found in the vast U.S. domestic market. Japan, for example, has 13 times as many people employed in export businesses as the U.S., and six times as many export trading offices. While Japan has a small army of English-speaking businessmen in the U.S. studying the American market and tailor-making products to sell in the U.S., American businesses have not made the same efforts to sell in Japan. That country is quickly becoming a market of wealthy consumers that would be attracted to American products. A new study shows that by the year 2000 the per capita income in Japan will be $21,540 or 20% higher than that of the U.S.

Unless the Japanese open their markets to U.S. businessmen, pressure for severe restrictions on Japanese exports will grow. Senator John Danforth of Missouri is already drafting legislation that would cut Japanese access to the U.S. market if Tokyo does not reduce its barriers. Said Danforth: "To date, our method of dealing with the Japanese has been to complain, and the complaints have had only marginal success. I think Congress is going to establish a mechanism that will provide reciprocity in trade."

Limits on trade could be very costly to American consumers. They would have a harder time buying imports, which are frequently less expensive, and the lack of foreign competition would permit domestic manufacturers to raise prices. Nonetheless, American bitterness about what it considers unfair trading practices could force Washington to halt some Japanese imports.

--By Christopher Byron. Reported by Gisela Bolte/Washington and Edwin M. Reingold/Tokyo

With reporting by Gisela Bolte, Edwin M. Reingold

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