IT'S JAPAN TRADE POLICY TIME AGAIN

IT'S JAPAN TRADE POLICY TIME AGAIN

Who says that trade-wise last week's Group of Eight summit in Okinawa was essentially a non-event?

Sure, the summit statement by President Clinton and other attending national leaders to 'intensify' their 'cooperation' to try to launch a World Trade Organization negotiating round this year smacked of the pro forma.Yet the summit did have some substantive trade policy fallout, unmentioned in the communique: a U.S.-Japanese rapprochement, just as trade ties between the two countries seemed to be growing increasingly frayed.

Hours before the summit began, U.S. and Japanese negotiators, obviously feeling summit pressures, finally hammered out a telecommunications understanding, which should ease the entry of U.S. and other foreign carriers into Japan's highly closed telecommunications market. Then, during the summit, Japanese Prime Minister Yoshiro Mori acceded to Clinton's call for further negotiations to deregulate not only the telecom but a host of other Japanese markets, a move Japanese officials had been resisting.

These accords helped avert what could have become nasty trade confrontations between the two governments. If, for instance, there had been no telecommunications agreement - it involved Nippon Telegraph and Telephone interconnection fees - the United States would have formally complained to the WTO that Japan was violating international trade rules.

Over the past few years, U.S.-Japanese trade relations, except for brouhahas over steel and antidumping rules, have been relatively quiet. Indeed, some observers are asking, 'Where have all the trade warriors gone?'

Behind the relative calm are both the robust U.S. economy and Japan's economic malaise.

Japan now is perceived as less of a threat to American prosperity. Recent intense U.S. focus on another Asian giant -- China -- may be another factor. So, too, the Enhanced Initiative on Deregulation and Competition Policy, which Mori agreed at the summit to continue. Thanks to the initiative, Japan is taking steps to foster more competition in at least some markets, such as telecommunications, energy, housing and medical products.

Nonetheless, there are signs that U.S.-Japanese trade frictions may again be on the rise.

For one thing, U.S. officials seem increasingly miffed at Japan's refusal to renew a recently expired agreement to open Japan's $5 billion-a-year flat glass market. A Japanese cartel, claim U.S. officials, still exerts a 'stranglehold' over the country's glass distribution network and the government does nothing about it.

It's been frustrating enough for Deputy U.S. Trade Representative Richard Fisher to lash out at Japan's Ministry of International Trade and Industry as more interested in protecting an industry than promoting competition. Key senators, including Finance Committee Chairman William Roth, R-Del., charge that Japan's refusal to deal with the flat glass issue reflects 'a broader pattern' of Japanese protectionism, ranging across the construction, auto, paper, film and insurance sectors.

There's even talk, however speculative, that the U.S. Justice Department might initiate an antitrust probe of Japan's flat glass marketing practices.

Meanwhile, U.S. officials sound like they are finally losing patience over Japan's locking out foreign contractors from a $250 billion-a-year public works market. Despite Japanese market-opening commitments dating back to the early 1990's, U.S. suppliers snag less than 1 percent of Japan's public work contracts. The Clinton administration has put Japan on notice that unless it promptly opens bidding procedures, it will launch a formal investigation of Japan's procurement practices, which could lead to WTO proceedings.

Then there are those two old trade frictions, steel and autos. They may heat up again.

The 1995 U.S.-Japan automotive agreement expires Dec. 31 and U.S. auto parts makers and the United Auto Workers are pressing for a tougher 'follow-on' pact. Despite the 1995 agreement, U.S. automotive sales to Japan over the last two years have fallen sharply, beyond what would have been expected from the Japanese recession.

U.S. Trade Representative Charlene Barshefsky looks to be sympathetic. Japan's 'continued restrictive practices' in automotive trade are 'intolerable,' she asserts. So far, however, Japan seems reluctant to negotiate a new auto accord, citing, among other things, how the auto industry has become so much more 'global,' making bilateral pacts passe. Any U.S. proposal to 'improve' the 1995 auto accord 'will go nowhere,' a veteran Japan-watcher predicts.

Meanwhile, a big-stakes U.S.-Japanese dispute over U.S. antidumping procedures is coming to a head. The Japanese government has formally protested to the WTO that the U.S. procedures violate international trade rules. If the WTO finds for Japan, it could compel the United States to rewrite its regulations, sparking vehement protests from steel and other industries - and Congress. In what may be an attempt to spook Japan, House Minority Leader Richard Gephardt, D-Mo., and 85 other congressmen are challenging it to agree to open its WTO antidumping litigation to 'public view.'

Against all this, the U.S.-Japan merchandise trade imbalance keeps growing and this year may hit $80 billion, by far the biggest U.S. bilateral deficit ever. The very size of the imbalance poses a constant threat to U.S.-Japanese trade ties, particularly if the U.S. economy markedly weakens. A new outbreak of 'Japan-bashing' could erupt.

Is there any real hope that U.S.-Japanese trade will move into a semblance of balance? If Japan's economy finally gathers steam and the U.S. economy slows, a basis might be laid. More Japanese market-opening deregulation initiatives would help, if faithfully implemented. So would a halt in Bank of Japan efforts to keep the yen cheap. But at its very core, the massive imbalance seems largely a matter of culture. Simply put, Japanese are great savers, Americans lavish spenders. And that, at least for now, looks non-negotiable.