Japan to Open More Building Jobs to U.S. Bids

After extending a deadline for decision by 13 hours, the United States on Saturday succeeded in extracting from Japan a promise to open an additional 17 large construction projects worth $7.5 billion to bidding by American and other foreign firms.

In negotiations that lasted nearly all night, Japan added three projects to a list of 14 that it had offered to open to foreign bidding during eight earlier negotiating sessions that dragged on for nearly a year.

The new total of 17 falls short of the “26 or 27” that J. Michael Farren, an undersecretary of commerce, said the United States had asked to be added to an earlier 17 approved in a bilateral agreement in 1988. But Japan promised Saturday to add an additional six projects, including a new international airport for Nagoya, when official decisions are made here to undertake the projects.

Both the U.S. Embassy and the Japanese Foreign Ministry announced the agreement. The embassy said that final approval on the American side will be made “by Cabinet-level officials.”

Although the U.S. Embassy statement said the new agreement “will make a positive contribution to U.S. construction firms seeking access to the Japanese construction market,” its economic impact is expected to be minimal. But it has considerable symbolic importance in the current disputes between the two countries.

In April, Carla Anderson Hills, U.S. trade representative, threatened to start proceedings to impose sanctions on Japan if an agreement were not reached by midnight Friday. A 13-hour extension of the deadline--to midnight Friday Washington time--moved the negotiations from what Farren, in a news conference late Friday night, described as “an impasse” to a conclusion.

The 11th-hour compromise avoided adding yet another strain to U.S.-Japan relations, already frayed by American discontent over Japan’s alleged tardiness in supporting the Persian Gulf War and years of continuing trade friction. The Japanese, for their part, were feeling increasingly irritated by what they see as a lack of gratitude for their $11-billion contribution to the U.S.-led Gulf effort and America’s inability to put its own economic house in order.

Japan is still smarting from the only sanctions the United States ever imposed upon it--punitive tariffs that were ordered on Japanese electronics products in 1987 in retaliation for an alleged failure to abide by a 1986 agreement on semiconductor sales.

Of the original $300-million sanctions, $165 million in punitive tariffs remain in force, and Japan is demanding their removal as the price for a new agreement on semiconductor trade.

After Hills made her threat to bar Japan from federally funded U.S. construction projects, Japan retorted that it would retaliate by withdrawing special measures it has taken since 1988 to help American firms win a piece of the Japanese construction market. Since the original pact was signed, 32 U.S. firms have been licensed to do business here.

On the projects worth $25 billion that were opened to foreign bidding three years ago, American firms, as of the end of April, had won contracts worth only $440 million, including design and architectural work, payments for which don’t show up in trade statistics. American retaliation, on the other hand, would have denied Japanese the opportunity to continue work on only about $100 million worth of current projects, Farren said.

Including non-federally funded work, Japanese construction firms have won about $2.5 billion worth of contracts in the United States.

Although the American trade deficit with Japan has fallen by nearly a third from a peak of $59.8 billion in 1987, it still amounted to $41 billion last year. Through April, the U.S. trade imbalance was running at a $44-billion annual pace.

Projects added under the new accord include a new airport in Sapporo on the northernmost island of Hokkaido, redevelopment of major railway terminal buildings in Kyoto and at Ueno in Tokyo and a second national theater.

“Major revisions” were made in the original 1988 agreement, and the number of projects open to foreign bidding will “more than double,” the U.S. Embassy statement said.

In response to criticism of the 1988 agreement by U.S. engineering and construction firms, the new pact will establish an independent organization to handle foreign complaints about barriers to working in Japan. It also sets up a new bidding system that includes both material procurement and consulting services.

The two sides also agreed to conduct a review of the new agreement one year from now.

Until Washington took up construction as an issue in U.S.-Japan economic relations, Japan’s construction industry ranked as one of the most tightly closed segments of Japanese business. It is still widely regarded as dominated by bid-rigging and collusion among contractors, politicians and government officials.