U.S., Japan Appear Headed for a Trade 'Train Wreck' : Tariffs: Political pressures in both countries make an auto import compromise almost impossible, officials say.

By JACK NELSON

June 22, 1995 12 AM PT

TIMES WASHINGTON BUREAU CHIEF

WASHINGTON — As the clock ticks toward the U.S. deadline for imposing trade sanctions on Japanese luxury cars, politics in both nations are making compromise in the bitter trade dispute almost impossible, officials of both sides said Wednesday.

Although neither side wants the United States to levy threatened 100% tariffs starting Wednesday, leading political figures on both sides of the Pacific see little gain and much risk to their own political destinies by yielding. Japanese Trade Minister Ryutaro Hashimoto’s aspirations to be the next prime minister and President Clinton’s concern for his own reelection have left virtually no room for a settlement, the officials said in interviews Wednesday.

A bargaining effort aimed at averting sanctions on the 13 Japanese car models is scheduled to open today in Geneva but a senior Clinton Administration official, who asked not to be identified, said that--barring some last-minute, unexpected turnaround--”we appear headed for a train wreck. The best guess is nothing happens in Geneva.

“A dynamic in the politics of both countries makes sanctions seem almost inevitable,” the official said. “And it has to do with the determination of both sides in the negotiations and with the way the public in both Japan and the United States would react to any change in their negotiations--and that affects the political fortunes of both Clinton and Japanese officials.”

U.S. Trade Representative Mickey Kantor said that in the Geneva negotiations “it is critical that we have a meaningful and concrete solution. Japan is the second-largest economy in the world. They have a responsibility to open their markets.” Specifically, the United States is demanding that the Japanese allow the sale of more U.S.-made autos and auto parts in their country.

But Kantor has privately said he expects no solution in Geneva. The talks will occur at a lower level, conducted on the American side by Ambassador-designate Ira Shapiro, general counsel of the trade negotiator’s office.

Hashimoto has felt especially vulnerable in past trade negotiations, according to a well-placed Japanese official, who said that the trade minister was “insulted” by Kantor’s tough talk and unyielding stance. Hashimoto believed that Kantor left him no room to negotiate without appearing to cave in to unreasonable U.S. demands, the Japanese official said.

Moreover, Hashimoto thinks that U.S. officials have not accorded him the respect he is owed as an official who may become Japan’s next prime minister.

Hashimoto, in a sharp exchange at a press conference after trade negotiations broke off in Whistler, Canada, in May, accused Kantor of “a very strong attack” and declared that he was “more scary than even my wife when I get under the influence of alcohol.”

The trade minister’s own eccentric personality and his sour relations with other Japanese officials, including Foreign Minister Yohei Kono, have also complicated Japan’s negotiations, the Japanese official said. Kono, with whom Hashimoto is reported to have bitter relations, has been more conciliatory in his approach to the trade dispute.

Hashimoto reportedly listens to few advisers or other officials and his relations with Takakazu Kuriyama, Japanese ambassador to the United States, are so poor that he communicates with the embassy here mostly through a cousin, Hiroshi Hashimoto, Kuriyama’s deputy.

So convinced is Japan that no settlement in the trade dispute is in the offing before the deadline that Japanese officials say the country is being “psychologically prepared” for the sanctions.

“It’s a very difficult decision for us,” said a Japanese official. “Japan is fearful of a possible spillover and an all-out trade war.”

The official said that adding to concern about a trade war was this week’s announcement by Transportation Secretary Federico Pena that the United States is prepared to impose sanctions against two of Japan’s cargo airlines for failure to honor commitments under an existing bilateral agreement.

“Japan now fears that the United States is following a policy of force and the transportation case makes it look like the United States will try to use force to get agreement and then repeat it and repeat it,” the Japanese official said. “It has hardened Japan’s stance.”

The White House also fears that retaliation by Japan could trigger a long-term trade war. But a senior Administration official said:

“We may go off the cliff on this one, but then both sides will wait and think and try to find ways to scramble back on track.

“Increasingly, in both Washington and Tokyo, experts in the trade relationship think it won’t be resolved until you go through the summer and look ahead to the APEC [Asian Pacific Economic Cooperation] forum in Osaka, Japan, in November.”

Clinton is scheduled to attend the Osaka session.

The official suggested that after Geneva, Osaka will be “the next checkpoint” in the trade negotiations, adding that “a lot of hot tempers will have to cool off before then.”

Elsewhere, U.S. officials pointed to trade figures released Wednesday to buttress their argument that Japan imposes insurmountable barriers to foreign goods, particularly American autos and auto parts.

America’s merchandise trade deficit soared to a record $11.37 billion in April as Japanese cars poured into the U.S. market, apparently in anticipation of the expected stiff sanctions.

Half the increase in April imports came in autos and auto parts, led by a $210-million jump in imports from Japan, which climbed 9.5% to $2.4 billion, the second-highest monthly total on record.

Laura D’Andrea Tyson, who chairs the White House National Economic Council, said the dispute over autos “is about the longer-term issue in trying to deal with access barriers in what is a critical market in both countries and an important source of the bilateral trade balance.”

House Minority Leader Richard A. Gephardt (D-Mo.) called the new trade figures alarming and declared that “the time for action is now” in punishing the Japanese for their trade practices.

Times staff writer John Broder contributed to this story.

* POINT OF CONTENTION: Trade deficit soars to record, stiffening U.S. resolve. D1