Japan Agrees to Open Market to U.S. Chips : Trade: Tokyo vows to give 20% of its market to foreign semiconductor producers and not ‘dump’ its products in the U.S.

WASHINGTON — The United States and Japan announced Tuesday that they have signed a tough, new trade pact that should open up Japanese markets to American computer chips, while providing greater protection against the illegal “dumping” of Japanese semiconductors in the U.S. market.

In return, the Bush Administration has agreed to drop steep tariffs imposed on Japanese imports of a wide array of consumer electronics products since 1987, when the United States sought to punish the Japanese for their failure to follow through with their pledge to allow greater access for American chip makers.

“This new arrangement is aimed at enhancing free trade in semiconductors,” U.S. Trade Representative Carla Anderson Hills said Tuesday. “It reaffirms and clarifies Japan’s commitments to provide full market access to foreign semiconductor producers and to deter injurious dumping.”

U.S. industry officials hailed the agreement, saying it could provide broad new opportunities for American firms in Japan, by far the world’s largest market for semiconductors--the integrated circuits that are the basic building blocks of computers and other electronic equipment. It also should give American firms a new incentive to invest in new chip technologies in order to take advantage of their new access to Japan.

“This agreement does what everybody wants,” said Pat Weber, president of the semiconductor group of Texas Instruments Inc., the Dallas-based chip manufacturer. “And any time that you have a clear signal of a new opportunity like this, then you can use that to invest.”

The five-year agreement formally calls for giving chip makers from the United States and other nations at least 20% of the Japanese domestic chip market by the end of 1992. U.S. producers now hold 13.1% of the $20-billion Japanese market.

American officials credit the 1987 imposition of trade sanctions against Japan as providing the turning point in the long-running controversy over computer chips. As recently as 1986, U.S. producers held just 8.6% of the Japanese market, and the U.S. share did not begin to rise until after the sanctions were imposed.

In 1987, with little progress in sight in opening up the Japanese market to American semiconductors, the Reagan Administration imposed import duties of 100% on $300 million worth of Japanese power tools and color television sets. Despite Japanese complaints, the sanctions seemed to work, Administration officials now say.

“The sanctions have done their job,” U.S. Deputy Trade Representative S. Linn Williams told reporters Tuesday. “And there’s simply no reason to continue them” now that the Japanese have accepted a new semiconductor agreement.

The new agreement goes far beyond the earlier accords reached on chips, industry officials said, because it requires that the Japanese government openly accept the goal of giving imports at least 20% of the Japanese market.

“Before, the targets (for the U.S. share of the Japanese chip market) were informal, and the Japanese didn’t even admit that they had agreed to them,” one lobbyist for the U.S. industry said. “Now, the Japanese government has officially accepted a target right in the agreement.”

The accord also strengthens the hand of U.S. trade negotiators in preventing Japanese efforts to dump Japanese-made chips at below-market prices in the U.S. market, industry and government officials said.

Now, Japanese firms must keep on file all financial data that could be used in a legal case in the United States in case an American company complains about Japanese dumping. And the Japanese firms must agree to turn all of those documents over to the U.S. Commerce Department within two weeks of the filing by an American firm of an unfair trade complaint against them.

Such a “fast-track” process on dumping cases will allow Washington to rule quickly on trade complaints, and make it far more difficult for Japanese firms to take advantage of the slow American legal process in order to reap quick profits.

“The fast-track response mechanism included in the new pact meets our goal of providing an effective deterrent to dumping,” said Wilf Corrigan, chief executive of LSI Logic Corp. and chairman of the Semiconductor Industry Assn., the San Jose-based trade group for the computer chip industry.