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Will Paying Double for A Lexus Car Help the US?

UNDERLYING the increasingly tense standoff between the US and Japan over autos and auto-parts trade are things most people can relate to: jobs and politics. Even deeper lie some powerful emotions -- frustration and pride -- that can drive nations as well as humans.

On May 16 the US announced it would impose 100 percent punitive tariffs on 13 models of Japanese luxury cars -- border fees that effectively double their price -- pending a period of public comment that ends on June 19. The measure, if not revised or called off, would be the largest package of punitive tariffs in US trade history, worth $5.9 billion on current sales.

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Because few American consumers are likely to pay $60,000 for a Lexus when they can get a comparable Mercedes for half the price, the tariffs are expected to halt the sales of the cars in question, which include Toyotas, Nissans, Mazdas, and a Mitsubishi model.

Japanese officials immediately said they would ask the multilateral World Trade Organization to resolve the dispute between the two countries. Officials here acknowledged they were considering retaliating with some punitive sanctions on US imports, but would not go into further detail. Under the WTO mechanism, Japan yesterday asked the US for urgent consultations on the dispute.

US officials are filing their own suit against Japan at the WTO and say the sanctions are legally justifiable because some Japanese business practices in the automotive sector are unfair.

In a monitor breakfast meeting with reporters in Washington yesterday, US trade representative Mickey Kantor said that Japan's criticism of the US not understanding their markets does not ring true anymore since US carmakers have invested heavily in new equipment and products, which adapted US cars to the Japanese market. ''So there can no longer be this rhetorical stance of the Japanese that somehow we don't try hard enough or we don't understand their market.

''It's time we challenge the entire scheme that the Japanese have implemented in order to make sure that foreign competitive parts and autos have been virtually, not completely, locked out of the Japanese market,'' Mr. Kantor said.

The political aspect of this dispute dates back to the beginning of the Clinton administration. The president vowed to pursue a vigorous trade policy that would open overseas markets to US goods and accordingly help the domestic economy. The administration has concluded a number of trade deals with Japan in areas such as financial services, government purchasing, and flat glass, but has not been able to reach an automotive accommodation with the Japanese after almost two years of negotiations.

Politics is something less of a factor on the Japanese side, but International Trade and Industry Minister Ryutaro Hashimoto has used his position as the Japanese front man to boost his political persona as a tough guy who can say ''no'' to the Americans. His stridency has caused some here to wonder how much room for compromise remains on the Japanese side.

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In sending the dispute to the WTO, Mr. Clinton is taking a risk. It's by no means clear that the Americans will prevail, and an unfavorable decision could hit the president near the finish of his reelection campaign.

THE most controversial point between the two countries concerns a mechanism engineered in 1992 under then-President Bush: Leading Japanese automakers agreed to set targets for their purchases of American-made auto parts for their assembly lines in Japan and the US.

These mechanisms, or ''voluntary plan'' in the US view, were successful in encouraging the Japanese carmakers to buy almost $20 billion worth of US parts last year. The US is now insisting that Japan renew and expand these plans.

But ''the situation has changed radically,'' says Koichi Shimokawa, an auto-industry expert at Tokyo's Hosei University. In 1992, the Japanese economy was in much better shape than it is now and the US economy was suffering. He explains the refusal of the Japanese government and carmakers to renew the plans as a function of reduced car production and a need to protect Japanese parts suppliers.

''If I am a manufacturer,'' says a Japanese auto-industry executive who spoke on condition of anonymity, ''I want to protect [Japanese suppliers] who contributed in the last 25 years, rather than the newcomers [US companies].''

Japan has no great unemployment problem -- the rate recently reached 3 percent -- but it is a tenet of Japan's industrial policy that the government and industry should work together to preserve employment opportunities, even if it means that companies carry vast numbers of less-than-productive workers.

Haruo Shimada, a labor economist at Keio University in Tokyo, agrees that part of the motivation for Japan's tough stand is to preserve jobs. But he says a more profound reason is the Ministry of International Trade and Industry's (MITI) abiding refusal to agree to any trade pact with numerical targets in it.

Japanese officials say the US treated the voluntary plans as a binding commitment, and refuse to enter into a renewal. Some might say this amounts to a kind of pride. As Masaharu Tanaka, executive vice president at Toyota Motor Corp. said after the sanctions list was released, ''The US government conducts its trade policy in a coercive manner completely beyond our comprehension -- it's simply unacceptable.''

Professor Shimada won't call it pride, but he does say that given the primacy of economic and trade issues in world affairs -- and the leading role of the Japanese economy -- ''most people support MITI's attitude, including the auto industry.''

Meanwhile, in the US, the sense of frustration with US-Japan trade imbalances does nothing but grow. Japanese exporters sold $66 billion more goods in the US than US companies sold in Japan last year and just under 60 percent of the US trade deficit with Japan is in auto and auto parts.

''We're asking the Japanese to play fair,'' said Kantor. ''If we buy their products, they should buy our products. That's the kind of reciprocity needed in a new world trading regime. The United States is not going to stand by and watch its workers and its businesses unfairly treated.''

As in past disputes, US security concerns might override its tough trade rhetoric. But, said Kantor, US-Japanese security ties are strong, but ''in the economic area we need to strengthen the relationship.''

Staff writer George Moffett in Washington contributed to this report.

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