No. 16 — April 21, 2000


Weekly Review


Washington should not have the last word on conditions of competition in Japan, a fed-up Tokyo finally decided after the March 31 release of the 2000 National Trade Estimate Report on Foreign Trade Barriers. Attempting once and for all to set the record straight, an interagency task force coordinated by the Ministry of Foreign Affairs issued a virtually point-by-point analysis April 13 of the lengthy Japan section of the White House's annual inventory of country-specific obstacles, past and present, to the global expansion of U.S. business. The rebuttal cites innumerable instances of misinterpreted facts or even mistakes in the Clinton administration report. "One-sided" consequently is a frequent description of the write-ups of old and new bilateral market access issues. The government also clearly believes that U.S. trade strategists have not given Tokyo the credit it deserves for deregulating the economy in the 1990s and otherwise improving the competitive environment for outsiders. As a result, the tone of the commentary often is defensive.

Tokyo's condemnation extends beyond the specifics of the trade barriers report to the process set in motion with the release of the catalog: Super 301. This direct descendent of controversial Section 301 of the 1974 Trade Act, which was reinstated last year (see JEI Report No. 14B, April 9, 1999), empowers the White House to target for removal self-identified priority foreign trade barriers and gives it the option to retaliate if negotiations do not produce agreement to end the cited unfair market practices. According to Japan and other U.S. trading partners, the unilateral thrust of the Super 301 mechanism as well as of the companion Title VII procedure, which gives Washington the means to tackle discriminatory foreign government procurement practices, puts these market-opening tools in direct violation of international trade rules.

If history is any guide, however, Japan need not worry about being labeled an unfair trader in the Super 301 and Title VII cycles that kick off at the end of April. Moreover, this year's trade barriers report contains no hints that the Clinton administration will employ either provision to advance its Japan market access agenda.

That prediction notwithstanding, government and industry in the United States maintain that conditions of competition in Japan still are skewed against U.S. suppliers of a long list of goods and services. Although several of these would seem to be strong contenders for priority designation under either Super 301 (flat glass and paper, to name just two perennial favorites) or Title VII (government procurement of computers and construction services), Washington once more is likely to skip this opportunity. No doubt, though, it will take advantage of the message-sending powers of the Super 301 and Title VII exercises by listing a number of candidates, mostly repeats but perhaps some new, for future trade action (see JEI Report No. 18B, May 7, 1999).

Unquestionably, too, the U.S. trade policy team is frustrated by its inability to complete the final report on regulatory reform under the U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy. The holdup is due mainly to an impasse over the interconnection fees that Nippon Telegraph and Telephone Corp.'s two regional operating units charge other carriers (see JEI Report No. 14B, April 7, 2000), but it also reflects disagreements in the insurance field (see JEI Report No. 12B, March 24, 2000). However, if push comes to shove, the Clinton administration will pursue resolutions of both issues under the World Trade Organization framework rather than through Super 301.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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