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Chips rift hurts U.S., Japan ties


WASHINGTON -- Trade relations between the United States and Japan took a turn for the worse yesterday as the two countries announced another drop in the foreign share of Japan's computer chip market, the leading barometer of trans-Pacific trade.

In response, the United States ordered emergency talks with Japan, a step that could eventually lead to trade sanctions.

The Clinton administration faces a diplomatic problem in the emergency talks, which will begin in mid-January. President Clinton is scheduled to meet with Prime Minister Morihiro Hosokawa on Feb. 11, and while the United States and Japan agreed last summer in Tokyo to reach several new trade pacts by then, little progress has been made.

The administration does not want trade frictions to topple Mr. Hosokawa's fragile coalition government. But while administration officials were optimistic last summer that the coalition government might be more receptive to U.S. trade concerns than previous Liberal Democratic Party governments, optimism is now giving way to frustration at the lack of Japanese concessions.

"The politics are obviously delicate, but there is less patience on our side than there was three months ago," said an administration official who requested anonymity. "Our business is with Japan, and their political problems are their problem."

The 1991 U.S.-Japanese Semiconductor Arrangement called for imports to account for 20 percent of the Japanese chip market by the end of 1992 and for increases through 1995 in overall market access, measured in terms of market share, joint ventures and other indicators.

The market share reached 20.2 percent in the fourth quarter last year but has been falling ever since.

Imported computer chips, mostly from the United States, accounted for only 18.1 percent of the Japanese market in the third quarter, Washington and Tokyo announced yesterday, down from 19.2 percent in the second quarter.

This development has put pressure on the Clinton administration, whose trade strategy with Japan is based on concluding further pacts modeled on the chip arrangement. But that arrangement must look like a success if the administration is to follow its pattern in using numerical benchmarks in future deals.

The administration is also eager to keep California's politically powerful computer-chip industry happy. Mr. Clinton sees California as critical to a re-election campaign, and computer chip executives were among the first to support his campaign last year, breaking ranks with the many industrialists who backed President George Bush.

Stan Anderson, a lawyer who represents Japanese computer chip makers, said the administration was wrong to emphasize market share. Total sales of imported chips have been rising in dollar terms in Japan, and the market share has been dropping only because sales of Japanese chips have been rising even faster.

Seiichiro Noboru, the top economics official at the Japanese embassy in Washington, also pointed to the rising sales but added that Japan would participate in the emergency talks.

U.S. trade officials and industry executives rejected the argument about increasing sales totals, saying that the 1991 arrangement covered market shares.

"Their economy continues to be sour, and they'd like to share the pain with us first," said Michael C. Maibach, director of government affairs at the Intel Corp., the nation's leading semiconductor maker.

In ordering talks yesterday, U.S. Trade Representative Mickey Kantor invoked an emergency consultations provision in the 1991 agreement.

The Reagan administration requested similar talks in 1987 under the 1986 U.S.-Japanese Semiconductor Arrangement, which was replaced by the 1991 agreement. The 1987 talks did not satisfy President Ronald Reagan and his aides, who imposed 100 percent tariffs on Japanese power tools and color television sets worth $300 million a year, the harshest trade sanctions the United States has imposed on Japan since the end of World War II.

They were gradually lifted and disappeared with the 1991 pact.

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