Having learned in the past year that it did not have as much economic leverage over Japan as it thought, the Clinton administration has signaled it is ready to jettison its all-or-nothing, package-deal approach to a trade agreement with Japan and strike whatever arrangements it can get piece by piece.
The U.S. trade representative, Mickey Kantor, hinted at the change in remarks to reporters on Monday. Since opening trade talks with Japan last July, the administration has been pressing Tokyo for a package deal, known as a "framework," that would consist of agreements for opening five priority markets in Japan: automobiles, auto parts, insurance, medical equipment and telecommunications.While the administration never explicitly ruled out the possibility of accepting deals piece by piece, it has been negotiating them as a package from the start. In February, aides to President Clinton boasted that he could have struck a partial deal with Morihiro Ho-so-ka-wa, who was Japan's prime minister at the time, covering only some of these areas, but that Clinton rejected that as insufficient.
Now American trade officials say that in the new negotiations, agreements to open Japanese markets in medical equipment, telecommunications equipment and insurance seem within reach and may be ready for signing at the next summit meeting of the Group of Seven industrial countries, set for July 8-10 in Naples.
But, the officials said, the two nations remain sharply divided on how to open Japan's automobile and auto parts markets, and this crucial area will probably take much more time to resolve - if ever. Two-thirds of the United States' $60 billion trade deficit with Japan comes from autos and auto parts.
Nonetheless, to show some progress, the administration now is inclined to close whatever separate deals it can on insurance, telecommunications and medical equipment - three sectors in which the Japanese government either controls the market or is the biggest purchaser. It would also continue to negotiate for however long it takes on autos and auto parts; private companies and dealers dominate those Japanese markets and are reluctant to open to foreigners.
In effect, the administration's posture in the framework negotiations with Japan has gone from "all or nothing" to "take what you can get and deal with the rest later."
Kantor, speaking by telephone from Paris, where he is participating in a meeting of the Organization for Economic Cooperation and Development, said: "You have got to be realistic. We can't predict what is going to happen in every area. When you are ready to reach agreement on a particular sector, you should go ahead and finalize that and continue to move forward on the others.
"We are not going to wait to open up everything until we make deals in all sectors. But we don't intend to stop with just one or two sectors, either. We see the framework negotiations as a continuing process."
Neither American nor Japanese officials want to go into another high-profile Group of Seven meeting with their trade stalemate still simmering, since that could only further roil the financial markets.
Kantor's remarks were the latest in a series of subtle shifts in the Clinton administration's trade policy toward Japan.
The lessons the administration has learned in the last year of dealing with Tokyo include:
- Japan, which has had three prime ministers in the past 12 months, is going through a period of prolonged internal turmoil.
- Clinton's get-tough policy toward Japan may have played well on Main Street, but it bombed on Wall Street, where fears of a trade war helped to push down the value of the dollar, drive up American interest rates and generally unnerve the financial markets.
- With the North Korea nuclear standoff heading into a crucial stage, the White House wants to have maximum cooperation with Tokyo, whose support is indispensable if any economic sanctions are to be imposed on Pyongyang.