U.S. Tells of Plans for Trade Sanctions Against Japanese

Raising the ante in a longstanding dispute, the Bush Administration announced plans Friday to bar Japanese firms from bidding on federally funded construction projects in the United States, in retaliation for Japan’s refusal to let U.S. firms bid on more of its construction contracts.

At the same time, the Administration officially cited China, India and Thailand for failing to protect U.S. copyrights, patents and trademarks--a failure that allows firms in those countries to produce cheap copies without paying royalties.

The move against the three countries is the beginning of a process of investigation and negotiation that could lead to sanctions if they do not change their policies to satisfy the Administration within six months. It marks the first time that U.S. Trade Representative Carla Anderson Hills has used authority given her under a 3-year-old trade law.

Japan’s discrimination against U.S. firms wishing to bid on Japanese projects has kept them out of a market potentially worth billions of dollars, Hills said. Japan agreed to begin opening its construction to U.S. companies in 1988, but since then, American firms have won only $200 million in contracts in a market estimated to be worth 90 times that amount. Japanese firms, meanwhile, received $2.7-billion worth of private contracts in this country in 1989, in addition to about $100 million in U.S. government jobs.

The action against Japan, which affects new contracts only, underscores the fraying economic relations between the two countries. U.S. officials have contended that Japan did not contribute its fair share to the Persian Gulf War, while Tokyo insists that the assistance it provided was not appreciated. The United States also is pressuring the Japanese to open their rice and semiconductor markets.

“Broadly speaking, the mood is not good,” said Robert Z. Lawrence, an economist with the Brookings Institution. “The crowbar is being swung.”

Yet Hills noted that by many objective measures, trade relations between the two nations have improved markedly. The United States has only about a half-dozen major outstanding disputes with Japan, compared to 15 when Hills took office two years ago, she said, and the U.S. trade deficit with the Japanese has dropped sharply.

“Last year, Japan bought more from us than Germany, France and Italy combined,” Hills noted.

The sanctions would not take effect until 30 days after they are published in the Federal Register next week, and they could be averted if U.S. and Japanese officials can reach an agreement in their ongoing negotiations over the issue.

But Hills expressed little hope for a breakthrough. “I think the negotiations aren’t going as well as they ought to be going,” she said. “Retaliation simply means a declaration of failure in my view.”

If applied, the sanctions would bar Japanese firms from public works projects that are related to energy, water, transportation and defense.

The action against China could further threaten its efforts to renew its “most-favored-nation” status, which puts it on an equal footing with other countries in paying the lowest tariffs on products entering this country.

Some in Congress already have argued that the favored status should be revoked to punish China for the Tian An Men Square massacre and for its sales of arms to unstable regimes.

“Unless China stops selling arms around the world, stops stealing American products and starts respecting the human rights of its people, the Administration should not extend most favored nation trading status to them. It would be unthinkable, and it shouldn’t be approved by Congress,” said House Majority Leader Richard A. Gephardt (D-Mo.).

The Administration also put the 12-nation European Community and Australia on its “priority watch list” to protest the quotas they have placed on the number of U.S.-made shows and movies that may be aired on their television stations. “TV, movies, films, documentaries are a premier export for us--every bit as important as the wine industry to France,” Hills said.

Those actions brought strong expressions of support from Capitol Hill, where the Administration has been accused of not being aggressive enough to defend U.S. trade interests.

“Retaliation is the only possible recourse,” said Sen. Frank H. Murkowski (R-Alaska), who has led congressional efforts on the Japanese construction issue. “We welcome foreign investment in the United States. It’s good for the economy and U.S. consumers. But we simply cannot tolerate trading partners that don’t believe in reciprocity.”