Japan Asks U.S. to End Sanctions on Electronics : U.S. Makers Say Chip Pact Still Not Being Honored

WASHINGTON — Japan has formally asked the United States to lift $165 million worth of trade sanctions that the Reagan Administration imposed in April, 1987, after Tokyo failed to comply with a landmark agreement on trade in semiconductors.

The sanctions, in the form of 100% tariffs on a variety of Japanese-made electronics exports, represent the remaining part of a package of trade penalties affecting some $300 million worth of Japanese goods that the White House imposed at the time.

President Reagan lifted the other $135 million worth in mid-1987 at the annual seven-nation economic summit in Venice.

Japanese trade negotiators arrived in Washington on Tuesday for several days of talks on the sanctions issue, but U.S. officials gave no indication that the Administration is about to go along with Tokyo’s desires.

Removal of the sanctions is important to Japan as much for symbolic as for economic reasons. The Japanese have regarded the sanctions as a badge of dishonor. There were fears that the two countries might be heading into a trade war when they were imposed.

Political Controversy

U.S. strategists said Wednesday that a decision to remove the remaining sanctions likely would be politically controversial. Indeed, American makers of semiconductors--often called chips--have been arguing for reimposition of the earlier tariffs, contending that Tokyo is slipping backward in its enforcement of the semiconductor agreement that the two countries signed in 1986.

The Japanese request, sent to U.S. trade officials this week by Vice Trade Minister Shigeo Muraoka, argues that the sanctions no longer are justified because Japan has opened its markets to U.S.-made semiconductors and is not violating the 1986 accord.

It argues that U.S. and other foreign semiconductor manufacturers have made significant progress in increasing their sales in the Japanese market, with sales volume this year now double that at the time the accord was signed and 70% higher than in early 1987.

U.S. semiconductor manufacturers have argued that, although Japanese firms are buying more foreign-made chips than they once did, the American chip makers are still not on track to achieve the 20% share of the Japanese market that they say the accord specifies for 1991.

Interpreting the Agreement

The text of the agreement on market share, made public by the Japanese this week, says only that the Japanese government “recognizes the U.S. semiconductor industry’s expectation” that sales of foreign semiconductors in Japan will grow to slightly above 20% by 1991.

While the accord said that the Japanese would welcome such an increase, it asserted that “the attainment of such an expectation depends on competitive factors”--including the sales efforts of the foreign producers and market needs in Japan.

Muraoka, and some U.S. semiconductor industry analysts as well, argued that the main reason the U.S. share of the Japanese chip market has not grown sharply is that Americans are not shipping to Japan the kinds of chips that Japanese buyers want.

For example, they say that most Japanese chip buyers need high-technology semiconductors for the consumer goods, telecommunications and automotive products they are making, but that U.S. chip makers are furnishing mostly low-tech units.

But U.S. officials--and spokesmen for the domestic semiconductor industry--insist that the so-called “market mismatch problem” has been exaggerated and contend that the Japanese still have not opened their market sufficiently to American-made chips.

It was not clear how vigorously Japan might push to have the sanctions lifted. Knowledgeable analysts say that the Japanese government itself is split over the issue, with the trade ministry pressing the United States to lift the sanctions but the politically powerful foreign affairs ministry only lukewarm about the request.

Reagan lifted the $135 million worth of sanctions after Japan cracked down on violations of one part of the 1986 agreement, pressing its companies to stop their predatory pricing, which was prohibited in the pact.

The $165 million in sanctions in effect are linked to the alleged refusal of Japan to help American chip makers increase their share of the Japanese market toward the 20% level.