Reagan May Ease Japanese Trade Sanctions at Summit

President Reagan is likely to relax U.S. sanctions imposed against Japan for running afoul of a bilateral agreement on semiconductor trade when he meets with Japanese Prime Minister Yasuhiro Nakasone today, U.S. officials signaled Sunday.

Reagan is expected to tell Nakasone that he is prepared to lift as much as 25% of the $300 million in punitive tariffs on selected Japanese products that were imposed by the United States in April.

While declining to state explicitly that the sanctions will be partially lifted, White House Chief of Staff Howard H. Baker Jr. told an interviewer for CBS’s “Face the Nation” program that “I would not be surprised” if an announcement on semiconductors comes out of the Reagan-Nakasone meeting.

And an Administration official, speaking on condition that he not be identified by name, said Reagan was looking for a method that “would give some relief” to Japan for its efforts to reduce below-market “dumping” by Japanese manufacturers of computer memory chips in Third World countries, mostly in Southeast Asia.

The sanctions were put in place after the Administration concluded that Japan was failing to live up to last year’s trade agreement calling for greater access to the Japanese market for U.S. semiconductors and an end to dumping of various types of tiny computer chips used in many electronic products.

Since the sanctions were first threatened in January and imposed April 17, Japan’s Ministry of International Trade and Industry has requested a 20% reduction in production of a type of computer memory chip known as 256K D-RAMs. Such chips are capable of holding 256,000 bits of information and are one of the most widely used kinds of semiconductors.

In conjunction with the production cutbacks and careful monitoring of export licenses by MITI, a pickup in demand from personal computer makers has driven up the worldwide price of such chips in recent weeks.

“I feel confident that (Reagan) won’t lift the sanctions except as and when there is marked improvement,” Treasury Secretary James A. Baker III said in an interview on CNN’s “Evans and Novak” program. But Baker quickly added that there has been “marked improvement” in Japanese compliance in reducing dumping of the so-called 256K D-RAM computer chips.

Baker said in a televised interview with ABC’s David Brinkley that prices on those chips had risen to between 80% and 85% of fair market value from the previous level of 60%.

White House officials have repeatedly insisted that Reagan would relax sanctions only in response to concrete evidence of Japanese compliance with the semiconductor agreement. But it was also clear that the Administration does not want to turn Nakasone away empty-handed after Tokyo recently promised to stimulate the Japanese economy by as much as $43 billion, a move long advocated by the U.S. government.

“In those conversations the President’s likely to discuss far more than just semiconductors,” the White House chief of staff said. “There are a lot of other issues between the United States and Japan that ought to be discussed and arranged if possible.”

In the United States on Sunday, electronics industry officials said that while there had been improvement in the dumping situation, they were concerned that not enough time had passed to illustrate the “continuing pattern” of improvement called for when the sanctions were imposed.

“Our position is that it still may be premature to lift any of the sanctions, because the Japanese have not demonstrated a pattern of compliance,” said George Scalise, a vice president of Advanced Micro Devices and an official of the U.S. trade group, the Semiconductor Industry Assn.

U.S. trade officials completed their review of data on both the dumping and market access last week. One official, who requested anonymity, said the data submitted by the Japanese were “not consistent” with the data collected by the United States. The United States data apparently show there has been less than a complete end to dumping in countries other than the United States and Japan and that U.S. companies’ sales in Japan had not measurably improved.

Both Commerce Secretary Malcolm Baldrige and Trade Representative Clayton K. Yeutter were said to have opposed lifting of the sanctions when the President’s Economic Policy Council deadlocked over the matter last week.

Japanese government officials insist that the trade agreement had not been violated in the first place, but rather that the problems were taking longer to resolve than the United States expected. However, they have asserted that their data would show dumping had been virtually halted.

Since the sanctions were imposed, U.S. government and industry officials have said there was a possibility that the sanctions could be lifted by degrees. Of the $300-million worth of goods targeted by the tariffs, $135 million is said to represent the losses to U.S. industry caused by the dumping; the remaining $165 million was identified as the amount of sales U.S. companies lost in Japan because market access there was not increased at the expected rate.

But government officials said in Washington on Sunday that they do not have a specific plan for removing part of the sanctions.

Industry officials believe that certain of the products will be removed from the tariff list, rather than reducing the level of the tariffs. The tariffs are now a 100% duty, which doubles the import price of the goods.

“To reduce the level of tariffs would erode the value of the sanctions,” said Scalise.

However, it is not clear that dropping one category from the sanctions list would result in a 20%-25% easing of the tariffs. Power hand tools, the smallest category on the list, account for about $30-million worth of imports from Japan annually; color televisions targeted by the tariffs make up about $90-million worth of imports.

Speculation so far has centered on laptop computers. Toshiba, whose laptop imports had been selling well in the United States before the tariffs were imposed, said last week it would move production of the machines to its facility in Irvine, Calif., regardless of whether and when the sanctions were lifted.

NEC Corp., another Japanese maker of laptops, also has said it would move its production to a U.S. plant.

The U.S. government “might consider that (as) enough impact and so we’ll give them quid pro quo,” said one industry official.

Tom Redburn reported from Venice and Donna K. H. Walters reported from Los Angeles.