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Japanese threaten to withdraw from trade talks on cars, parts


WASHINGTON -- Japanese officials said yesterday that they would withdraw from trade talks with the United States on automobiles and parts if the Clinton administration threatens sanctions during the negotiations.

The bleak reports from the trade talks sent the dollar down to new lows against the Japanese yen yesterday, and this morning in Japan the U.S. currency dipped below 80 yen for the first time ever. The dollar, after hitting 79.80 yen in early trading, was back at 80.45 yen by late morning after the Bank of Japan intervened to buy dollars.

In yesterday's trading in New York, the dollar had plunged to 80.63 yen, from 82.05 Monday.

The Japanese warning on sanctions came as Japanese and U.S. officials reported little progress after two days of discussions in Washington. The administration is pressing Japan to remove barriers to import of U.S. cars.

Frustrated by the lack of progress after two years of talks, Mr. Clinton's economic advisers decided last week that they would threaten the Japanese with punitive tariffs if the two sides failed to agree on automobiles within three weeks.

U.S. officials said no overt threats were made at yesterday's talks, but one official said that the administration "was resolved to address this one way or another if negotiations fail."

"Other options will have to be considered," the official added.

The Japanese distributed a position paper to reporters yesterday that said, "If the U.S. government should announce retaliation against Japan in an effort to create negotiating leverage, we may be forced to suspend negotiations and proceed immediately" to the World Trade Organization.

There, the Japanese say, they would charge that the United States was violating world trade rules by unilaterally seeking to impose sanctions against another country.

Under Secretary of Commerce Jeffrey Garten, the chief U.S. negotiator yesterday, said in an interview that the talks focused on two U.S. demands: that Japan make sure more auto dealers sell U.S. cars and that Japanese automakers purchase more components from U.S. companies. Car and car parts trade accounts for about two-thirds of the $60 billion U.S. trade deficit with Japan.

The United States is seeking to extend an agreement, negotiated under the Bush administration in 1992, under which Japanese car manufacturers agreed to increase the use of U.S. parts.

After yesterday's talks ended, Yoshihiro Sakamoto, a vice minister of international trade and industry, said that as long as the United States insisted on expanding the voluntary plan, there would be no agreement.

Mr. Garten said that lower-level talks would be held next week involving technical experts from the United States and Japan.

"We made very little progress today," he added. "Large gaps remain in all the major areas."

The two sides continued to put forward very different reasons that U.S. automobiles and parts had captured such small shares of the Japanese market.

The United States contended that Japan maintained many subtle trade barriers, like a heavily regulated system of repair shops with close links to Japanese automakers, and that as a result, those garages vastly prefer using Japanese parts to foreign parts.

Washington also argued that the refusal of many Japanese auto dealers to sell U.S. cars had denied the U.S. Big Three auto producers -- General Motors, Ford and Chrysler -- "the shelf space" that would enable Japanese consumers to look at U.S. cars.

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