Trade Hawks Want Tokyo's Blood. Bush Wants A Few Concessions

When Japanese politicians look back on the gulf war, they think Tokyo's generous $13 billion contribution to Operation Desert Storm should buy them a respite from Washington's relentless demands for access to their markets. When congressional trade hawks look at the same donation, they see a cynical exercise in checkbook diplomacy--and feel the time is ripe for new trade sanctions. "The Japanese have a public-relations disaster on their hands," an Administration official says. "Everyone who has an ax to grind is going to take a run at them."

President Bush, as is his wont, hopes to pick his way between these extremes on Apr. 4 when he meets Japanese Prime Minister Toshiki Kaifu in California. Japan's cash contribution to the gulf effort isn't "buying any slack on trade issues," vows one Administration official. With Tokyo coming up on deadlines to expand market access for U. S. insurers, construction companies, and computer chip makers, Bush will try to squeeze fresh concessions out of Kaifu without caving in to trade hardliners.

SOUR MOOD. This middle course will disappoint many U. S. executives, most notably Chrysler Corp. Chairman Lee A. Iacocca. When the chief executives of Detroit's Big Three met with Bush to discuss emissions standards and other issues, Iacocca made a pitch for limiting Japan's share of the U. S. car market. He's hardly the only one offering advice. The National Association of Manufacturers (NAM) wants Bush to appoint a task force to reassess U. S. economic policy toward Japan. And, noting the trade deficit (chart), U. S. Chamber of Commerce President Richard L. Lesher recently warned Tokyo: "The time for modest improvements and expressions of good intentions is past."

Pressure is also building on other fronts. In one of his first acts in office, new Agriculture Secretary Edward R. Madigan wrote his Japanese counterpart to protest Japan's refusal to let U. S. growers display their rice at a food exhibit and suggested that U. S. farmers might boycott Japanese products. U. S. Trade Representative Carla A. Hills has warned Japanese Foreign Minister Taro Nakayama that the mood on Capitol Hill is turning sour. Democrats are telling Hills that unless market-opening talks with Japan bear fruit soon, it will be time to impose the tough sanctions they provided for in the 1988 trade law. Hills will need the Democratic votes to win an extension of negotiating authority that runs out June 1.

Some irate politicians and executives think Tokyo's sidestep around the gulf war gives them an opening. In a Mar. 6 letter to Bush, the Chrysler chairman warned of "a strong political backlash" if U. S. auto employment continues to fall. He added: "The American public is upset over Japan's difficulties in supporting the gulf war."

Congress is pushing especially hard in two areas where Japan has reneged on past trade agreements: construction and chips. By May 1, the Administration must decide whether to retaliate against Tokyo for refusing to open the public-works construction market. The White House also faces a July 31 deadline to renew a five-year-old agreement that promised U. S. companies a 20% share of the Japanese computer chip market. The current share for U. S. chips: less than 14%. Senator Max S. Baucus (D-Mont.) warns that Congress will be looking to Hills for a "vigorous pursuit" of U. S. interests.

MISPLACED BLAME? Despite the rising clamor, the White House isn't about to scrap its commitment to free trade. Bush quickly rebuffed Iacocca's call for a lid on Japanese auto sales. Administration officials fume privately that Detroit carmakers created their current troubles by seeking to boost profits instead of market share in the mid-1980s, when the soaring yen squeezed their rivals.

In one sense, pressure to win concessions from Tokyo has actually eased because the overall U. S. trade gap with Japan has narrowed from $56 billion in 1987 to $41 billion last year. But some U. S. manufacturers remain unimpressed. "The trade deficit hasn't been shrinking where we need it to shrink--in high-end electronic products," says R. K. Morris, the NAM's director of international trade. That, counters an Administration Japan expert, is the fault of U. S. companies failing to exploit their technological advantages. "We had fax and CD technology, but nobody put it out," he says. "The Japanese ran with it."

Bush, riding high on his gulf victory, isn't overly concerned about his domestic critics. But he, too, sees an opportunity for progress in some festering disputes. After he met with Kaifu a year ago in Palm Springs, Tokyo came through with quick concessions. The President will attempt a repeat performance. And as Tokyo frets over how the gulf war has hurt its relations with Washington, Kaifu will be under even more pressure to deliver.

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