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Clinton's Trade Tactics Taken To Task, Home and Abroad

US threat against Japan draws both support and warnings by many experts

THE Clinton administration's renewed threat of trade sanctions against Japan has stirred controversy among Washington policymakers and elicited rejection by trade partners abroad.

Many lawmakers view the so-called ``Super 301'' - a trade-law provision that allows the president to cite nations for obstructing free trade and to punish them if they refuse to remove the barriers - as a necessary measure against recalcitrant trading partners.

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Others, however, see it as a damaging move that undermines the multilateral approach to trade disputes championed in the successful completion of the latest round of global trade talks.

Some advocates who seek to pry open foreign markets for more United States exports say many industrialized trading partners already practice ``managed'' commerce. They cite inpenetrable Japanese markets and trade blocs in Europe, such as rigid import quotas on Japanese motor vehicles. Super 301, they say, is a way to help the US play the game.

``It is a mechanism for America to develop its priorities,'' says Alan Wolff, a top international-trade lawyer and former US trade official. ``It's a process that indicates why the US government is concerned about unfair trade practices and engages the private sector in helping it work out problems.''

Japan has ``a long history of papering over differences by signing agreements rather than taking action,'' says Michael Maibach, director of government relations for Intel Corporation, a computer-chip manufacturer. ``They don't think they have a trade agreement until sanctions are imposed.''

Jerry Jasinowski, president of the National Association of Manufacturers (NAM), hails Super 301 as a way to create ``more balance in the [US-Japan] relationship.''

Tokyo's barriers to foreign investment helps to restrict Japan's demand for foreign goods, Mr. Jasinowski says. He computes the world's stock of foreign investment: Europe has 38 percent, and the US has 26 percent. With only 0.4 percent, ``no wonder Japan's manufactured imports are so low,'' he says.

In Tokyo on Friday, the undersecretary of commerce for international trade, Jeffrey Garten, told the Japanese Federation of Economic Organizations: ``In no country are the barriers to entry so widespread and deeply rooted as they are in Japan. In no country have we been negotiating so long and so hard without success.''

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NAM and other powerful industrial lobbies want Congress to step up the pressure. At a Monitor breakfast on Friday, House Foreign Affairs Committee chairman Lee Hamilton (D) of Indiana said Japan's market ``may be the most closed in the world,'' but he opposed ``managed trade'' by ``devising specific measurements of opening up markets.''

Europe sees 301 as threat

Far from winning overseas support, Washington is drawing fire from transatlantic partners. They regard Super 301 as a threat to the implementation of the most comprehensive trade accord in history, the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) that was resolved in December.

In Brussels, Sir Leon Brittan, European commissioner for external economic affairs, called the US decision to resuscitate Super 301 ``disappointing.'' He warned: ``The European Union will be examining carefully the ambit of these measures and checking whether their implementation would be contrary to the United States' trade obligations, including those agreed to in the Uruguay Round.''

Like the US, Europe has a growing trade deficit with Japan. Last year, it reached $30 billion, reflecting more than a twofold increase in the past decade. US trade-watchers, such as Clyde Prestowitz, president of the Economic Strategy Institute, charge that Europeans are more concerned with keeping Japanese goods out of Europe than with pressing Japan to open its market to European goods.

Mr. Prestowitz says the stakes are big if Washington strengthens its hand in managed trade: The shortfall in Japanese imports exceeds $200 billion annually, he says, and the US share is $50 billion.

``Boosting US exports to Japan by [$50 billion] would increase the US gross domestic product by 1 to 2 percent, create 1.5 million jobs, and reduce the trade and budget deficits by $35 billion,'' he says.

Prestowitz rejects the notion that Japan will import more as it bounces back from recession. It has run large trade surpluses for 20 years, he says, despite the rapid growth in its economy, sharp fluctuations in US and European growth rates, and the many bilateral and multilateral efforts to reduce trade frictions with Japan.

US cannot back down now

The administration's self-described ``results oriented'' trade policy is futile, says Paul Krugman, economics professor at the Massachusetts Institute of Technology and author of the recently released book ``Peddling Prosperity.'' He challenges the ``strategic traders in the Clinton administration'' who heighten trade tensions by presenting demands to Japan that go unmet.

``At this point, the US government faces a dilemma,'' Mr. Krugman writes. ``To drop the issue would look like weakness; but there is no real policy option other than to close US markets to Japanese goods,'' he continues.

The result, he says, is ``protectionism that is matched by Japanese retaliation and European emulation. Within two years, the results of four decades of negotiations to open world markets are reversed.''

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