U.S., Japanese Officials Race for 11th-Hour Trade Truce

WASHINGTON -- Senior Japanese officials headed to Washington on Friday, racing against steep odds to strike a trade truce and stave off U.S. sanctions action at midnight.


Barring last-minute miracles -- and breakthroughs tend to come at the very last moment -- U.S. sources said Thursday they expected only a partial deal to emerge and that some actions against Tokyo were therefore "all but a given."


Japanese Trade Minister Ryutaro Hashimoto was not expected until the evening, setting the stage for a long night of negotiations with U.S. Trade Representative Mickey Kantor.


"These things do go down to the wire," White House spokeswoman Dee Dee Myers said Thursday. "Ambassador Kantor is hopeful they will make more progress in the upcoming round."


On Thursday night, U.S. aides were banking on an agreement to deregulate Japan's insurance sector and, hopefully, a deal on government procurement but faced a continued deadlock over cars.


Under such a scenario, the administration planned sanctions proceedings, albeit fairly narrowly targeted, to deliver the message that Tokyo must change its trade ways, aides said. Myers repeated that President Bill Clinton was "prepared to take action" unless Tokyo agreed to open some of its markets.


Should the negotiators fail to strike a deal on government purchasing, U.S. officials have vowed immediate retaliation.


Kantor would target a range of Japanese firms that compete for U.S. government contracts and impose sanctions in 30 days.


"I'm still somewhat hopeful on procurement because we are trying to narrow the gap," said a Japanese official. "But we need their help as well. This is not just a one-sided play."


Clinton and his top economic and foreign-policy advisers met Thursday to run over the sanctions options.


At the top of the list, according to U.S. officials, stand sanctions proceedings against Japan's $4.5 billion flat glass market under the law called Super 301.


Aides say Tokyo operates a cartel in glass, with two or three Japanese producers doggedly clinging onto a constant market share despite outmoded, costly practices. Foreigners have captured just three percent of the market and aides said Clinton's inner circle is united on the need to use unilateral sanctions pressure to try to change that.


But there was plenty of argument Thursday over whether to lash out at Japan's prized car sector, with the car trade accounting for two-thirds of the $60 billion trade imbalance. Officials said sanctions action on car parts was possible, but most downplayed the likelihood.


Aides expected no further action under Super 301, which opens a 12 to 18 month negotiating process under the explicit threat of sanctions.


While previous 301 threats have never led to sanctions, U.S. trading partners hate to go on the list. Tokyo escaped punishment when it missed the last deadline for deals in February, and U.S. patience has since worn thin.


"The bottom line is that we ain't got no deal. How do we strike the balance (in reacting) is the key," said one aide.


Many in the administration fear that a heavy hand will upset currency markets and cast a pall over a mid-November summit of Asia-Pacific leaders to be held in Indonesia. Still others argue for pressure now to attack the $60 billion trans-Pacific trade imbalance.