Soothing Talks, Troubled Times

By Barbara Rudolph

When President Reagan imposed trade sanctions against Japan last month, the prospect was raised of an all-out economic war between the two nations. Last week, with the $300 million worth of sanctions in place, Japanese and American officials were scrambling to defuse tensions. As a prelude to Prime Minister Yasuhiro Nakasone's visit to Washington this week, Special Envoy Shintaro Abe was dispatched to the White House to outline a plan to reduce Japan's $59 billion trade surplus with the U.S. Meanwhile, a U.S. delegation in Tokyo urged the Japanese to lower barriers to American goods.

Abe, a former Foreign Minister, asked Reagan to remove the 100% duties that the President had slapped on a variety of Japanese color televisions, computers and power tools on April 17. Abe outlined a series of economic proposals -- aimed at reducing his country's irritating surplus -- that Nakasone will present during his visit. The measures involve sustained efforts to boost Japanese consumer demand and thus imports. Japan also plans to encourage the lending of perhaps as much as $30 billion to Third World debtor nations. The prospect of the changes, however, did nothing to strengthen the U.S. dollar: last week it fell below 140 yen for the first time in more than 35 years.

A White House spokesman described the Japanese proposals as a "move in the right direction"; nonetheless, the U.S. retaliatory tariffs, imposed for Japan's alleged failure to comply with a 1986 semiconductor agreement, may not be rescinded soon. Said a senior Administration official: "We would like to see the sanctions lifted. But we cannot phony up data." Translation: Japan's proposals are not yet good enough. That answer is unlikely to gladden Nakasone, who has other problems. Faced with strong opposition, the Prime Minister last week withdrew from parliamentary consideration a plan for a 5% sales tax.

In conversations with Nakasone and other officials in Tokyo, U.S. Trade Representative Clayton Yeutter and Agriculture Secretary Richard Lyng urged Japan to act quickly to open markets. Still, the Japanese refused to discuss with the U.S. any lifting of an import ban on rice, a staple of the local economy. Said Lyng: "We are not going to wait forever."

Another U.S. trade team fared better in South Korea. Commerce Secretary Malcolm Baldrige struck an agreement with South Korea last week that eased tensions caused by Seoul's $7.1 billion trade surplus with the U.S. South Korea vowed to increase imports of American computers, and in exchange the U.S. pledged not to restrict imports of Korean-made autos, machine tools and semiconductors. The South Korean government also announced measures aimed at boosting imports. Warned Baldrige: "We will be watching the implementation of this new policy very closely."

Despite Washington's unhappiness over trade, there was some good economic news last week. The Commerce Department reported that the U.S. economy, which grew at a sluggish 2.5% rate last year, expanded at an annual rate of 4.3% for the first three months of 1987. But the seemingly strong showing, largely due to an increase in unsold goods, may be reversed in the second quarter. If so, U.S. officials will feel even more pressed to find a resolution to the troubling trade issues.

With reporting by Gisela Bolte/Washington and Barry Hillenbrand/Tokyo