MR. YEUTTER'S HAMMER

SLOWLY, ALMOST IMPERCEPTIVELY, the Office of the United States Trade Representative has begun to flex its muscles. In the last year and a half, Clayton Yeutter has shaken the office from its slumber and is poised to slap down uncooperative trade partners.

The turnaround at USTR is partly attributable to Mr. Yeutter and his staff and partly to prodding from an angry Congress. But unlike much of the legislation coming from Congress, Mr. Yeutter's tack has not been protectionist. Instead his strategy is to strike those countries that violate their trade commitments.The first blow from Mr. Yeutter's hammer is coming soon and Japan will feel its impact. Verbal pastings were enough to move the European Community to compromise on agriculture, but rhetoric and threats have little effect on the Japanese. Japan has been an undependable partner in the practice of economic coordination and Mr. Yeutter's patience is exhausted.

The United States has pleaded with Japan to stimulate its domestic economy and reduce its bilateral trade surplus. Japan responded by producing the inaptly named Action Plan in 1985 and the Maekawa Report in 1986. But neither of these "market opening" proposals have been implemented and political logjams in Tokyo ensure they never will be.

What's more, the proposed Japanese budget is the least stimulatory in years and Prime Minister Nakasone's much ballyhooed tax reform figures to have little or no impact on domestic demand.

"The Japanese have no appreciation of the frustration being felt by Americans," said Alan Woods, deputy U.S. trade representative, in a meeting with The Journal of Commerce's editorial board last week. "Either they don't understand or political circumstances are such that they are incapable of responding. It doesn't make any difference which one, we don't see any progress."

Japan contends its market is open. Slow U.S. sales are more a case of insufficient quality, they say. Yet U.S. telecommunication or supercomputer producers are acknowledged as the world's technological leaders and the

dollar's depreciation vis-a-vis the yen should make these products a bargain for Japanese consumers. Yet in Japan U.S. supercomputers - which hold a world market share of over 80 percent - have captured only 23 percent of the market.

The sector-specific MOSS talks aimed at opening the Japanese market for U.S.-made medical products, telecommunications, wood products and electronics have gone nowhere, according to USTR officials. In fact, said Mr. Woods, the economic difficulties brought on by the yen's appreciation have hardened the Japanese bargaining position to the point where they are not even trying to convince U.S. negotiators that progress is being made.

Even more disconcerting is that the Japanese have proven unreliable even on specific agreements like the semiconductor pact. Japanese promises to halt third country dumping and to open its domestic market to U.S. chips have not been kept. Even the Japanese Ministry of International Trade and Industry admits it has been unable to enforce the agreement.

There has been no agreement on what sort of measures might be administered, but as the world's largest market the United States wields a pretty big stick. Some semiconductor industry officials suggest quotas against foreign electronics products made with Japanese semiconductors. The hope is that pressure from their customers might force the Japanese semiconductor producers to abide by their agreement. Another consideration is to block sales of Japanese electronic equipment used for the monitoring of air traffic, unless U.S. construction companies get a fair shot at contracts for Osaka's Kansai airport.

Members of Congress have long argued that the Japanese will not cooperate unless action is taken. Sadly, it seems they were correct. Now the Japanese must brace themselves for a blow from Mr. Yeutter's hammer.

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