Happiness at the 11th Hour : Kantor announces new Japan trade deal

The series of very substantial trade agreements reached over the weekend between the United States and Japan were not simply about opening up Japan to more American goods and services. The eleventh-hour deal was also about opening a much-needed new chapter in U.S.-Japan relations. As Clyde Prestowitz, a former U.S. trade official and frequent critic of Japanese trade practices, put it, the understandings “put U.S.-Japan relations on a new plane. It’s a win-win proposition.”

Maybe the Japanese won’t think so, because despite the milestone market-opening agreements in insurance, glass, medical and telecommunications equipment, Tokyo may yet face U.S. trade sanctions. The two countries did not resolve their longstanding dispute on Japanese barriers to American cars and auto parts, which account for two-thirds of America’s $60-billion annual trade deficit with Japan. Consequently, U.S. Trade Representative Mickey Kantor is taking steps that could lead to possibly imposing sanctions. But many months have to pass before that happens.

Still, what was achieved in these difficult talks was remarkable. The long pattern of superficial U.S.-Japan agreements has been broken.

The United States, which under the Clinton Administration has been taking an uncharacteristically firm line with Japan, had put Tokyo on notice that it was seeking a “results-oriented” policy. The American strategy was not to allow Japan to defuse and obfuscate the issue of results in addressing the chronic, intolerably high trade imbalance.

The two sides agreed to what Washington certainly hopes is objective, enforceable criteria to measure progress, but specific numerical targets were tip-toed around, as the Japanese preferred. Over the past 15 months an impasse over how to measure results had been a major hurdle. Now the big question is whether U.S. insurance companies will, in fact, find it easier to sell products in Japan; whether the Japanese government actually buys U.S. medical and telecommunications equipment, and whether U.S. makers of flat glass used in automobiles and construction truly find Japanese buyers.

The fragile government of Prime Minister Tomiichi Murayama will now want to follow through with other programs, such as domestic deregulation and tax reform. The United States sees efforts on these fronts as crucial to stimulating the Japanese market for foreign goods and services.

Meanwhile, there is still the prickly issue of autos and auto parts. Detroit has made some progress in penetrating the Japanese market, but more needs to be done by Tokyo, especially when it comes to auto replacement parts. The specter of sanctions puts pressure on the auto talks to produce results.

Even so, Tokyo is now committed, at least in principle, to eroding some structural barriers to foreign goods and services. That is progress. If the auto sector were somehow included in this new phase of cooperation, that would really signal a sea change in the U.S.-Japan relationship.