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Japan wins on omitting targets, but U.S. gains new trade 'rules'

THE BALTIMORE SUN

TOKYO -- For more than 20 years, Japan-U.S. trade talks have always moved in four steps:

* Washington makes demands.

* Tokyo rejects the demands.

* Tokyo offers a few face-saving inches.

* Washington settles for the inches.

About 1:50 a.m. yesterday, Bill Clinton, the president who was going to change all that, reluctantly settled for the inches.

With 8 hours and 40 minutes left before he was to board Air Force One to move on to South Korea, the top hands who came with him for the Tokyo economic summit joined him and his top Japan-U.S. trade negotiators in his suite at Tokyo's Hotel Okura.

Before them was a draft of an agreement designed to create a "framework" for Japan-U.S. trade talks for the remaining 3 1/2 years of his term as president.

The president asked them one by one, and each said he should take it.

And so, "the president concluded that this was an agreement that was very much in the interest of the United States," David R. Gergen, counselor to the president, said later.

Seven hours after accepting it, a bleary-eyed Mr. Clinton joined Prime Minister Kiichi Miyazawa in a downstairs ballroom of the same hotel to declare the agreement "a good beginning."

'Results-based' approach

The agreement is far less than U.S. officials wanted, but it contains elements never before tried in all the stormy decades of Japan-U.S. trade strife.

They include:

* A promise of "a highly significant decrease" in Japan's $130-billion-a-year global trade surplus "over the medium term."

* Five lists, or "baskets," of the two countries' most difficult trade issues, for which "sets of objective criteria" will be devised to monitor whether Japan's markets are becoming more open or more closed.

* Promises that Japan's prime minister and the U.S. president will meet twice a year to talk about the trends in trade.

What it does not contain is any commitment to make either the trade balance or the market indicators reach any particular level.

Until this week, U.S. negotiators publicly called that commitment a key to any agreement. But Japanese officials hung tough to the end on that critical point.

"You cannot expect anyone to help fashion a noose to hang himself," a senior Japanese official said at midweek as the negotiations got down to cases.

Even without that commitment, "what you have is something that goes far, far further toward explicitness and clarity and deadlines and schedules than anything you have ever seen," said W. Bowman Cutter, the head of the U.S. negotiating team.

U.S. officials offered a specific definition of what they will accept as a "highly significant reduction" in Japan's trade surplus.

With Japan's trade surplus currently running at a historically high 3.4 percent of gross national product, they said only "a return to this country's historic norms" of the 1960s and 1970s -- between 1.5 percent and 2 percent -- within four or five years would be satisfactory.

That would create more than a million jobs in countries that are Japan's trading partners, of which several hundred thousand would be in the United States, U.S. negotiators said.

To cut its trade surplus, which some estimates say may reach $160 billion this year, Japan agreed to stimulate its economy, to put new stress on improving its citizens' lifestyles and to open its markets wider to foreign products and services.

At briefings yesterday, Japanese officials stuck to their position of never discussing goals or targets.

Within the five "baskets" of issues, yesterday's agreement singles out a list of priority trade categories in which "objective criteria" are to be set up in time for the first Japan-U.S. trade summit, six months from now.

Those include automobiles and auto parts, which account for 60 percent of Japan's $50-billion annual trade surplus with the United States, insurance and Japanese government procurement.

Progress indicators in the other fields are to be devised by next July.

The use of such indicators gives the Clinton administration the "results-based" approach to trade negotiations that was its main objective, said Charlene Barshefsky, deputy to U.S. Trade Representative Mickey Kantor.

U.S. negotiators stressed that the agreement is, as Mr. Cutter put it, "the rules of the game, not the game itself."

"The rules matter," he added. "They set the preconditions for a fairer and more rigorous competition."

But how the game comes out "depends on our perseverance," he added.

Repeatedly as they discussed the agreement, members of the U.S. team spoke of the need for "perseverance" to make it work.

New dispute breaks out

That need was clear in a new Japan-U.S. dispute that broke out almost as soon as the agreement was announced.

U.S. negotiators told reporters they had fought off Japanese demands that all areas covered by the agreement be exempted from the "301" legislation that requires the administration to retaliate against any country that discriminates against imports from the United States.

The U.S. right to resort unilaterally to U.S. law if Japan fails to make progress will be spelled out in an exchange of side letters to be made public next week, Mr. Cutter said.

But Japanese briefers said their side letter would reserve the right to cancel negotiations under the agreement in any area on which the U.S. resorted to retaliation.

For Mr. Miyazawa, the agreement was a bittersweet ending to a week that may have been his last walk across the international stage as prime minister.

Mr. Miyazawa's governing Liberal Democratic Party is trailing badly in poll results one week before parliamentary elections in which it could lose the prime minister's post for the first time since the party was founded 38 years ago.

His eyes briefly became misty near the end of the joint news conference, possibly his last with a U.S. president, as Mr. Clinton effusively praised his "wisdom, determination and genuine leadership" in the trade negotiations.

"I do not think that this day would have come to pass had it not been for Prime Minister Miyazawa, and I thank him in a heartfelt way," Mr. Clinton said.

"You were very generous," the prime minister said with a grateful smile as they shook hands after the microphones were turned off.

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