Talks on trade appear deadlocked U.S., Japan unable to resolve auto issue


TOKYO -- American and Japanese negotiators headed into their last hours of talks this morning amid growing signs that they were still deadlocked on the central issue -- Japan's huge surplus in two-way automotive trade.

Presidential press secretary Marlin Fitzwater described the talks as "hard-fought battles."

"I would say there are very tough negotiations going on," he added. "Both sides have very strong positions and a lot at stake, and we're working them very hard."

Participants described the talks, especially on the deeply contentious auto issues, as frequently resembling debates and arguments more than negotiations.

Individuals present at yesterday's marathon talks said that Commerce Secretary Robert A. Mosbacher Sr., heading the U.S. negotiators, at one point waved Japanese documents in the air as he contemptuously rejected a package of trade concessions offered by his counterpart, Kozo Watanabe, Japan's minister of international trade and industry.

"I would be embarrassed to present this to the president," Mr. Mosbacher was said to have declared.

"The jury is still out on what we'll be able to do in terms of market access," Mr. Bush had said after the day's negotiations but before attending a dinner at Prime Minister Kiichi Miyazawa's official residence at which he became ill, collapsed and had to leave.

Members of the two teams resumed negotiating today showing no early signs of closing gaps that increasingly seemed to reflect fundamentally different outlooks.

The Japanese are resisting demands for "results-oriented" negotiations, insisting that setting goals or targets would violate fundamental free-trade principles under which governments should not intervene in the marketplace. U.S. officials counter that the pattern of interlocking relationships among Japanese companies does not invite genuine free trade and that the only way to change the system is to stress results.

"They're talking at each other, not with each other -- in some very basic ways, neither side is really hearing what the other is saying," a Japanese official said yesterday.

From Mr. Bush's arrival on Tuesday, the automobile trade has been the central point of contention. Trade in automobiles and auto parts account for three-fourths of Japan's $41 billion trade surplus with the United States.

Japanese auto manufacturers announced plans, devised under intense pressure from the Tokyo government eager to mollify the Americans, to import a few thousand U.S.-made cars each and sell them through their dealer network. U.S. officials have derided that as a drop in the bucket compared with the 1.5 million autos Japan exports annually to the United States. The American position has been that radically increased use of U.S.-made auto parts -- both in Japan and in Japanese-owned factories in the United States -- is the best way to reduce the trade imbalance.

Yesterday's talks made it clear that the U.S. side was rejecting Japan's time-honored device of sending American negotiators home laden with "omiyage" -- souvenirs -- designed to promote good feeling without fundamentally changing this country's way of waging trade.

"Japan is not yet an open trading system," Mr. Bush bluntly told Prime Minister Miyazawa at their first meeting yesterday, National Security Adviser Brent Scowcroft told reporters at an afternoon briefing.

Japanese trade negotiators appeared stunned by U.S. rejection of the gestures made so far toward the Americans.

Japan "can't go any farther," Mr. Watanabe said.

The first clear sign of trouble came in midafternoon yesterday, when the Ministry of International Trade and Industry (MITI) canceled a 5:30 p.m. briefing at which it had planned to lay out the "action plan" that was to be the core of its response to the U.S. pressure.

Noboru Hatakeyama, the vice minister who had been scheduled to conduct the briefing, complained bitterly that the Americans "don't seem to be able to understand" that what they are asking amounts not to free trade but to "managed trade" designed to assure U.S. exporters a share of certain markets in Japan.

Pressed by reporters, members of the U.S. team acknowledged that, while Washington can never admit that it is demanding managed trade, the administration is switching its approach after decades of discussing commerce with the Japanese category by category and issue by issue.

"We're saying that we define open markets as results that show up in real U.S. exports to Japan, and they can accomplish that any way they like," one person present at the talks said.

MITI has revealed a plan for a "voluntary" leap of $10 billion in imports by key Japanese companies over the next three years and for a series of government steps that include relaxed regulations, credit guarantees and a wide range of other ways of encouraging imports.

On many issues, from global economics to talking North Korea out of building nuclear weapons, Mr. Bush and Mr. Miyazawa expressed agreement in their first discussion.

And late yesterday afternoon they produced a "strategy for world growth" to coordinate fiscal and monetary stimulation of the world's two biggest economies.

Treasury Secretary Nicholas F. Brady, announcing the plan, said FTC that the two leaders adopted it after agreeing that economic growth in Japan, Europe and the United States is "flat."

The two leaders' statement "expressed concern that growth of the world economy in 1991 slowed to the lowest level in nearly a decade" and "recognized that the outlook for growth of the world economy this year is weaker than previously expected."

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