Trade Talks to Test Clinton Mettle In Penetrating Japanese Market
FOR two months, Japan has waited for one issue to come along that would serve as a reality check on President Clinton's vague but tough-sounding talk on trade.
Next week, in Hawaii, the two nations will confront each other over market share in computer semiconductors, the trade issue that symbolizes the high-stakes contest for global leadership in high-technology industry.
Already Michael Armacost, the United States ambassador to Tokyo, is warning the Japanese of a new mood on trade issues in Washington.
"The Clinton administration is prepared to utilize the tools at its disposal - multilaterally where possible, bilaterally when necessary - to achieve a rough equality of trade and investment opportunity," he said in a March 15 speech. "The test of the policy will be practical: We are interested in results."
The Hawaii talks will focus on Japan's failure to live up to a 1991 trade pact that set a goal of 20 percent market share for foreign computer chips in Japan by the end of 1992.
But more broadly, the talks will reveal to what extent the Clinton administration will pursue such "results-oriented" trade agreements and help other American industries penetrate foreign markets, especially Japan's, with specific targets.
Clinton inherited the semiconductor pact from the Bush and Reagan administrations. The pact was first negotiated in 1986 in an attempt by the two Republican presidents to help US chipmakers in the face of massive dumping of cheap Japanese chips in the 1980s and from years of being locked out of the Japanese market.
"The fundamental policy of the Japanese government was technological independence," says Norman Neureiter, a director of Texas Instruments Japan Ltd. and head of the Japan branch of the US Semiconductor Industry Association (SIA).
Mr. Reagan, despite being an avid free-trader, even backed up the pact by slapping $350 million in import sanctions on Japanese electronic companies. The sanctions were fully lifted when the pact was renegotiated in 1991, but they remain a potential tool for the Clinton administration that worries Japan.
Even before the March 22-25 talks begin in Hawaii, Japan is making clear that it will strongly oppose proposals by Clinton aides to use a "strategic trade" policy that imitates the chip pact by setting quantitative targets for market access of US products.
The chip pact, says Sozaburo Okamatsu, a director-general of Japan's Ministry of International Trade and Industry (MITI), "is a bad example of an arrangement between the world's two biggest free-market economies."
MITI resents the fact that it had to arm-twist Japanese industry into buying foreign (mainly American) chips. "We are not a state-run economy," Mr. Okamatsu said, although MITI's role in shaping Japanese industry has been extensive in the past.
He says the 20 percent target is an "expectation," not a government commitment.
Even so, he says, it is unlikely that the target will be reached soon. Final figures for the fourth quarter of 1992 will be released by the weekend and are not expected to go much above the previous quarter's 15.9 percent, based on US calculations. (The figure in 1986 was 8.6 percent.)
MITI was somewhat embarrassed this week after it had to deny Japanese press reports that it would claim that some US companies had failed to deliver semiconductors to Japanese companies. But the report nonetheless showed how nervous Japan is about Clinton policies. The report also riled US Trade Representative Mickey Kantor.
US semiconductor makers find the pact has made a big difference in helping them to gain market share in Japan. "I think the tail wind of the agreement has helped us," says Keiske Yawate, president of the Japanese subsidiary of US chipmaker LSI Logic. He says the pact shortened by about seven years the time that his company needed to win contracts.
But the US industry is still disappointed at Japan's efforts to meet the 20 percent target. Many Japanese companies still are not buying US semiconductors, says William Howe, president of Intel Japan.
The shortfall in market share could affect US competitiveness in global markets. "If Americans were excluded from the world's large [semiconductor] market indefinitely, eventually we would not have the production volumes to compete on a cost basis," Mr. Neureiter of Texas Instruments Japan says.
The industry also is concerned that Clinton might impose punitive sanctions that could upset new relationships built up between US and Japanese firms. He notes that US market share in Japan has actually risen during the severe recession in Japan during the past two years.
The SIA opposes sanctions but is vague on how to pressure Japan to continue efforts to expand US market share.
Neureiter says sanctions were effective under the 1986 pact. "Will they work again? I don't know," he says.