WASHINGTON -- U.S. and Japanese trade officials said yesterday that they were making progress toward agreements to open Japan's controlled markets in insurance and government purchasing.
But they said that talks on getting Japan to buy more U.S. cars and auto parts were still deadlocked and that no accord was likely anytime soon.
Both U.S. and Japanese officials emphasized that they still have much work to do to close the deals on insurance and Japanese government procurement -- particularly the procurement of telecommunications equipment by Japan's state-owned phone monopoly.
But if Washington and Tokyo are able to close those deals in the next few weeks, it appears increasingly likely that they will declare victory in those two areas and break them off from the auto negotiations, which would continue on a separate track for as long as it takes to reach an accord, if ever.
While any market-opening agreements with Japan would be good news for the Clinton administration, the fact is that two-thirds of Japan's $60 billion trade surplus with the United States comes from its vastly superior sales of autos and auto parts in this country, as compared with U.S. sales in Japan.
If no agreements can be struck on insurance and procurements, or if only partial agreements are struck, President Clinton could find himself faced with an unpleasant choice between his political credibility and the dollar's credibility.
The reason is that the administration has set Sept. 30 as the deadline for Japan to make satisfactory progress in these trade negotiations; otherwise, Washington would initiate trade sanctions.
If President Clinton does not move to impose at least some sanctions on Sept. 30, he will appear to be backing down on his administration's oft-repeated trade threat.
With midterm elections looming in November, that could be politically damaging -- particularly since the administration's private polls show that its get-tough approach with Japan is among its most popular foreign policy initiatives.
If the president does move to impose sanctions, it could set off another plunge of the dollar, as traders once again assume that the administration's only tool for dealing with the trade imbalance between Japan and the United States is devaluing the U.S. currency against the Japanese yen.
A weaker dollar might cut the trade deficit by making Japanese )) imports more expensive in the United States and U.S. exports cheaper in Japan.
The Clinton administration has already drawn up a list of imports from Japan on which it would impose punitive tariffs, under both the Super 301 and Title VII trade laws, should no deals emerge by the end of this month.
Japanese officials have told U.S. reporters in recent days that they would either break off all negotiations with the United States if it imposes sanctions or take the United States before a tribunal of the General Agreement on Tariffs and Trade.
At the same time, the Japanese officials warned that other Asian countries with trade surpluses with the United States would not look kindly on Washington resorting to sanctions, especially before the Jakarta meeting of the Asia-Pacific Economic Cooperation forum, which Mr. Clinton will be attending in mid-November.
It is precisely to avoid these stark choices -- after 15 months of fruitless negotiations between the Clinton administration and four different Japanese governments -- that the U.S. and Japanese sides have begun what are likely to be a marathon set of talks to try to reach an accord before Sept. 30.
The U.S. trade representative, Mickey Kantor, and Commerce Secretary Ronald H. Brown met yesterday afternoon with the Japanese trade minister, Ryutaro Hashimoto. After his negotiations with Mr. Brown, Mr. Hashimoto quipped that "there was no fatal attack" on him from the U.S. side, but he refused to disclose any details of how the discussions went.
Mr. Kantor and his top negotiator, Charlene Barshefsky, are scheduled to hold talks today and Friday in Los Angeles with the Japanese foreign minister, Yohei Kono, who will be in town for a four-way meeting of Japanese, U.S., Canadian and European Union trade ministers. Then all sides are expected to return to Washington for still more negotiating sessions.
In a briefing with reporters yesterday, Mr. Kantor played down hopes for an immediate breakthrough, but he also played down the threatened trade sanctions.
"That appears to be a long, long way away as we sit here today," said Mr. Kantor, who clearly was trying to avoid saying anything that could set off another fall in the dollar.
Progress on opening Japan's markets in insurance and government procurement has been more forthcoming than that for other sectors because neither area involves large layoffs of Japanese workers or goes to the core of the Japanese economy.
But the automobile issue does. The car is the symbol of the Japanese export economy. The Japanese auto makers and affiliates carry enormous political clout in Japan. And, most important, because of all the past arguments and negotiations between the two countries on auto issues, there is great mistrust between them.