US-Japan trade vise tightens on Takeshita. Japanese premier faces US sanctions if he can't deliver open markets
Prime Minister Noboru Takeshita faces a vital political test as Japan and the United States head for what may be another collision over trade issues. Negotiations for greater US access to Japan's beef and public-construction markets are deadlocked. US officials threaten to impose retaliatory sanctions against Japan if agreement is not reached by the end of this month.
Mr. Takeshita's own government is at an impasse over these questions, caught between conflicting interest groups and political allies and American pressure. The premier himself is challenged to fulfill his pledge last fall to be leader who could ``deliver results'' in US-Japan economic relations.
For any prime minister, the handling of Japan's ties with its No. 1 ally is an issue which can bring down a government. No one suggests that Takeshita is in danger of falling if trade talks fail. But the conduct of the talks is already a subject of fierce political debate within the ruling conservative Liberal Democratic Party, with would-be successors of the premier reportedly accusing him of being too timid.
The government is sending two senior Cabinet members to Washington in a bid to resolve the disputes. Deputy Chief Cabinet Secretary Ichiro Ozawa, who has played a key behind-the-scenes role in the construction talks, left for talks in Washington yesterday. Takashi Sato, minister of agriculture, forestry, and fisheries, is due to go to the US before the end of the month.
The issues on the table pose particularly thorny problems. The US demands for opening up beef and public-works markets cut right into important links between the ruling party and their strong base of support among farmers and in the construction industry. Farmers are wooed with programs ranging from price supports to some protected markets. The dispensing of public-works contracts is an equally powerful tool for winning support.
In the case of public works, the US has asked for waivers of requirements that firms have prior experience in Japan, and for changes in bidding procedures. A similar agreement was reached last fall for the construction of the Kansai International Airport, a project being carried out by a government-funded private corporation.
Last January, when Takeshita visited Washington, an agreement in principle was reached for US firms to be allowed access to six large-scale public works projects. The one-time dispensation was intended to give them an opportunity to gain experience in Japan to become eligible for future projects.
But talks to implement this formula broke down. The Japanese have returned to the table earlier this month with new proposals to expand the list of projects and to lengthen the period for submitting bids.
The agricultural issues are apparently more simple. Japan maintains quota limits on imports of beef and oranges to protect domestic producers. Starting in 1978, the US has negotiated twice to increase those quotas. In 1978 Japan imported only 16,000 metric tons of beef. Last year the amount rose to 214,000 metric tons. Imports make up a third of Japan's beef consumption. Some 80 percent of US beef exports go to Japan.
The Japanese have offered to again increase the quotas when the current agreement, signed in 1984, expires on March 31. The US insists it will not sit down to formally negotiate until Japan agrees to a definite end to the quota system. While the US says it seeks rapid liberalization, US beef industry sources say a gradual five-year transition is acceptable.
Japanese beef raisers say full liberalization is unacceptable. They worry that Japanese beef producers, whose costs are two to three times higher than their Australian or US competitors', will survive in a full open market. ``I can't accept the idea of damaging the beef industry fatally,'' says Shinzo Nakase, director of the government's Livestock Import Promotion Corporation.
US Agriculture Secretary Richard Lyng and Special Trade Representative Clayton Yeutter said this week the US would immediately complain to GATT if no agreement is reached. (GATT is the General Agreement on Tariffs and Trade, the forum that regulates international trade.)
US officials are confident GATT will rule in their favor, as it did last fall in a complaint against quotas on 12 processed food products.
Some Japanese political figures favor the bilateral deal. Japanese farm organizations are pressing against it.
Unlike four years ago, when the last agreement was reached, there are powerful pressures within Japan for liberalization. Japanese industry favors the course, supporting the need for cheaper food for consumers and hoping concessions on agriculture will take the heat off manufactured goods issues. Japanese consumers, who have tended to back farmers, are angry over the high prices they pay.
Going to GATT would be politically easier for government, even though officials known they will likely lose the case. By doing so, they can argue to the farm lobby that they did everything they could to resist.