U.S. Fears Reversal in Japan Trade Progress

WASHINGTON —  The Clinton administration is concerned that weaker-than-expected economic growth in Japan could contribute to a reversal of the progress Japan has made in reducing its huge trade surpluses, Treasury Secretary Robert Rubin said Tuesday.

Last year, America’s trade deficit with Japan shrank to $47.7 billion, the lowest since 1991. But economists are forecasting the gap could begin widening again this year because of the strength of the dollar and a sluggish Japanese economy.

A widening trade deficit with Japan, coupled with a huge and growing deficit with China, were discussion issues last week during a trip Vice President Al Gore made to the region and are expected to be principal agenda items for an upcoming trip planned by Rubin.

The Treasury secretary is scheduled to leave Wednesday for a weeklong trip that will include stops in Japan and the Philippines, where he will attend the annual meetings of finance ministers from the 18-member Asia-Pacific Economic Cooperation Forum. Rubin is also scheduled to visit Vietnam in an effort to further trade normalization.

Rubin acknowledged that Japan had succeeded in shrinking its trade surplus with the rest of the world, cutting it from more than 3% of its total economy to about 1.4%.

“The issue is not to have them go back the other way,” he said at a briefing for a small group of reporters. “To avoid that you have to have good, healthy economic growth.”

House Speaker Newt Gingrich, in Tokyo on Tuesday as head of a congressional delegation touring Asia, said trade tensions between the world’s two largest economies remain an “irritant,” and he called on Japan to do more to dismantle what he called “the most elegantly sophisticated protectionist system in the world.”

Rubin is scheduled to meet Friday with Japanese Prime Minister Ryutaro Hashimoto and Finance Minister Hiroshi Mitsuzuka, with the talks focusing on Japan’s economic prospects and efforts to overhaul its troubled banking system.

Banking reforms are also scheduled to be a key agenda item at the annual meeting of APEC finance ministers, held this year in the Philippine resort of Cebu.

Rubin will hold discussions on the sidelines of the APEC meeting with Chinese finance officials and, he told reporters, U.S. concerns about human rights will be discussed.

In Vietnam, Rubin will formally sign an agreement in which the Hanoi government will take responsibility for up to $150 million in debts incurred by the former government of U.S.-backed South Vietnam.

Agreement on the debt issue moves the two countries closer to concluding a trade agreement, one of the final steps to resuming fully normal relations. President Clinton lifted a trade embargo against Vietnam in 1994 and then moved to establish diplomatic relations between it and the U.S. in 1995.

Rubin will be the highest-ranking U.S. economic official to visit since the Communists won the war in 1975.

Asked about the timing of his visit, Rubin said, “It seemed like a very good time to do something to move this normalization process forward, assuming that we can agree on the next steps.”