SUNS  4330 Tuesday 24 November 1998



JAPAN: TRADE FRICTION LOOMS DESPITE CLINTON VISIT

Tokyo, Nov 22 (IPS/Suvendrini Kakuchi) -- The U.S. and Japanese governments turned on the charm for each other during American President Bill Clinton's whirlwind two-day visit here, but this
apparent warmth does not dispel threats of a bilateral trade war.

The widespread perception here is that Clinton wielded a more conciliatory tone toward Japan's efforts to stimulate its economy -- toning down rhetoric after American officials tangled with Tokyo over tariff reductions at the Asia-Pacific Economic Cooperation (APEC) meetings last week.

At the APEC meetings that ended Nov 18, U.S. officials virtually accused Japan of sinking a planned trade liberalisation pact that in the end was to be sent instead to the World Trade Organisation.

Tension had also been building up in recent months, with Washington accusing Tokyo of foot-dragging in Asia's crisis. For its part, Japan feels that the U.S. was using the recession as a pretext to further prise open domestic sectors even at a time when firms are going bankrupt.

Japan's growing trade surplus with the U.S. also clouds ties, with American officials saying Tokyo needs to reverse slumping imports since the U.S. could not be the world's "only buyer of the last resort" taking in exports from ailing economies. Against this backdrop, the 'Yomuiri Shimbun' said Saturday that Clinton had adopted a "softer tone in urging Tokyo to act".

The Japanese government has been quick to jump on the show of warmth between Clinton and Japanese premier Keizo Obuchi as two leaders shook hands and patted each other during a lunch of tempura Thursday.

"President Clinton's visit this time showed that the partnership between Japan and the United States has become much more important than ever in terms of not only bilateral relations, but also of the stability of the entire world," a foreign ministry official stated, asked to assess the meeting between the leaders of the world's largest economies.

The statement illustrates Japan's keen interest to smooth away ripples that has been threatening to put distance between Washington from Tokyo -- and show that bilateral ties remain intact despite economic friction.

Visiting just after the Japanese government unveiled a record 200 billion U.S. dollar stimulus package, Clinton said: "I believe it is clearly not only in the interest of the world and the (Asia-Pacific) region but in the interest of the people of Japan to move forward with Prime Minister Obuchi's strategy."

His diplomatic words, though, did not hide doubt on whether this eighth and latest stimulus package -- the biggest in Japan's eight years of recession -- would work. At a press conference Friday, Clinton said: "Sometimes when you have to turn a country around, it takes more than you think in the beginning."

An article in the November issue of the 'Asahi Shimbu'n newspaper's 'Foreign Affairs publication argues in fact that Washington is getting impatient with Tokyo, and is looking at developing more ties with China -- which would hurt Japan's most valued relationship.

Analysts here point out that while Clinton's visit is a good sign -- especially since it was made despite the president's decision to skip the APEC summit -- deeper economic friction threatens relations.

Despite his outward endorsement for Obuchi, Clinton also pointedly warned that Japan could face protectionism in the United States unless the government took quick measures to corrected its "unfair" trade practices in steel and other sectors.

"The United States had this year a 500 percent increase in the imports of hot rolled steel from Japan," Clinton told a business forum in Tokyo sponsored by the American Chamber of Commerce in Japan.

He continued: "If there is a perception of unfair trade, the perception held by Americans, that as long as the U.S. economy grows then they must accept imports, will disappear."

The finance ministry reports Japan's merchandise trade surplus with the United States in October soared by 31.9 percent from a year earlier, up for the 25th consecutive month, largely due to a quickening drop in imports. Exports are slowing too, though by a smaller percentage.

Japan, which accounts for 70 percent of Asia's economic output, says its economic stimulus package would bring about recovery in two years.

Still, Boyd de Menthe, a business writer on Japan-U.S. economic issues, says more and more Americans are upset with Japan's failure to increase imports and take more responsibility in shoring up the world economy. "The viewpoint is that Japan will not change because its trade surplus
is growing which means its going plenty of cash. So Japan is happy to keep relying on its exports," he said.

On Japan's side, there is growing frustration with Washington which Tokyo feels has been unreasonably hard on it when it is struggling to recover. "There is sense a hurt among top Japanese circles. Perhaps this is why Clinton did not hammer out too strongly this time," said Minoru Tada, a political analyst.

Tokyo stood its ground at the APEC when it refused, under a draft trade liberalisation scheme for nine sectors, to make rapid tariff cuts on forestry and fisheries products which it says are already weakened by low prices.

Washington conceded no accord could be reached, but not before accusing Japan of retreating into protectionism and denting APEC's progress toward its vision of becoming a free trade zone.

It is against this uneasy backdrop that Japan is also trying hard to placate Washington. "Maintaining good relations with the US remains the pinnacle of Japan's foreign policy," said Tada.

The Japanese media, in editorials on the Obuchi-Clinton summit, is urging Tokyo to ensure Washington it will act quickly to stabilise its economy and rectify the imbalance in trade relations with the U.S.

"The international community is now faced with an economic crisis and on the political front there are growing threats to world peace and stability, including the situation on the Korean peninsula," the 'Yomiuri Shimbun' said Saturday. "The widening trade imbalance must not be allowed under any circumstance to rekindle Japan-US trade friction and harm existing cooperative frameworks," it added.