"Buy More Foreign Goods"

By Charles P. Alexander

As millions of his countrymen watched and millions of Americans waited, Prime Minister Yasuhiro Nakasone appeared on Japanese national television last week with a crucial mission: to prevent an international trade war. In stern tones, he told his audience that the U.S. Congress, incensed by Japan's $37 billion trade surplus with America, was on the verge of erecting steep new barriers to imports. Warning that the free-trade system and even peace and prosperity were in danger, Nakasone made an unprecedented appeal to the Japanese public. "I would like to ask you to buy more foreign goods," he said. "If each Japanese buys $100 in foreign goods, the increase in imports from that would amount to $12 billion, and foreign countries would be happy." To help make more imports available, Nakasone said, his government would take new steps to simplify the maze of regulations, standards and other restrictions that make the Japanese market seem impenetrable to many overseas companies.

In a country where Prime Ministers do not normally give fireside chats on television, Nakasone's speech was an extraordinary event. But then, these are not ordinary times for Japan. American impatience with Japan's slowness in opening its markets has reached a flash point, putting economic relations between the two countries in their most precarious position in decades. Nakasone recognized that dramatic action was needed to defuse the confrontation and preserve a trading partnership that has enriched both the U.S. and Japan.

The Prime Minister's appeal to the Japanese public drew immediate praise from the White House. Said Chief of Staff Donald Regan: "This is the first time there has been a freewheeling television statement in which he pointed out to his own people the need for them to change their habits." In a speech last week, Secretary of State George Shultz called Nakasone's action "laudable" and said that the U.S. should resist protectionism. Some business executives were also impressed. Said Chairman Stephen Levy of Bolt Beranek and Newman, a communications-equipment firm in Cambridge, Mass: "Certainly you have to be encouraged by a Prime Minister who gets up before his people and urges them to buy American products." Nakasone's program to reduce import barriers was less encouraging. It was brimming with promises and restatements of earlier commitments but almost barren of specifics. Some of its provisions:

-- The government will help foreign manufacturers break into the $26 billion Japanese telecommunications market by simplifying product standards.

-- Overseas companies trying to gain approval to sell medical equipment and pharmaceuticals will, in many cases, no longer have to duplicate in Japan clinical tests that they have already performed in their home countries.

-- To encourage more imports of electronics products, copyright protection will be granted on computer programs and semiconductor chips. In the past, American companies have complained that Japanese manufacturers have been able to copy freely foreign programs and chips.

Tokyo said it would unveil a more comprehensive and detailed plan of action in July, but U.S. businessmen doubt that swift and sweeping changes are in store. "This is just more rhetoric," said John McDonnell, a group vice president for the Electronic Industries Association. "Old habits will die hard," agreed Chairman Edson Spencer of Honeywell, the Minneapolis-based computer company. An American official based in Japan called Nakasone's speech a "big yawn."

The Prime Minister's vague program may not be enough to calm the protectionist furor in Congress, where both the House and Senate have overwhelmingly passed resolutions calling on the President to retaliate against Japan unless it reduces import restrictions. Said Republican Senator John Danforth of Missouri: "The problem is not going to be solved by a single Nakasone speech or package of promises. The only thing that counts is results." Agreed Representative John Dingell, a Michigan Democrat: "We essentially have here an unsecured promissory note, and if our negotiations with Japan continue as they have in the past, it is probably nonnegotiable."

The timing of Nakasone's speech was no coincidence. It came just before representatives from Japan and other industrial countries gathered last week in Paris for the annual ministerial meeting of the Organization for Economic Cooperation and Development. Shintaro Abe, the Japanese Foreign Minister, admitted beforehand that his country wanted to avoid being made a "scapegoat" at the Paris session. As expected, the U.S. pressed at the meeting for a new round of multilateral trade negotiations. The ministers agreed that those talks should start "as soon as possible." A firm date, probably in 1986, may be set when the leaders of Japan and the major Western industrial nations gather next month in Bonn for their annual economic summit. The West Europeans, led by the French, also wanted discussions of monetary reforms that would help reduce instability in foreign exchange markets. In response, Treasury Secretary James Baker said the U.S. would be willing to act as host to a monetary conference on technical reforms that could open the way to a broader consideration of how to coordinate economic policies.

Greater cooperation will be difficult, however, if the U.S. and Japan remain at odds. Perhaps the most contentious issue between the two countries involves the telecommunications trade. The U.S. last year imported Japanese telecommunications equipment worth $2 billion, while American shipments there amounted to only $194 million. Japan made some moves last week that could help close that gap. The government announced that it would consider an application from Hughes Aircraft to sell communications satellites to Japan in a joint venture with two Japanese companies. The deal could be worth $400 million. Nippon Telegraph & Telephone, which is now being converted from a government monopoly to a private company, signed a new contract to buy 10,000 telephones from ITT. Nonetheless, many American telecommunications executives considered these gestures to be mere tokens. Whenever Japan unveils a program to boost imports, many foreign businessmen get a feeling of seeing an I Love Lucy rerun for the tenth time. Nakasone's new plan is the sixth trade- liberalization package announced since 1981. Yet Japan's imports have decreased by nearly 5% in the past three years, and booming exports have more than doubled its annual trade surplus, from $20 billion to $44 billion. In many cases, government initiatives to encourage imports have been thwarted by an entrenched bureaucracy, which writes and administers trade regulations. Concedes Kinuko Kubota, a noted Japanese constitutional scholar: "Our bureaucracy's conditioned reflex is to be frightened whenever it comes to American goods."

In his speech last week, Nakasone seemed to be trying to sidestep the bureaucracy with a direct appeal to Japanese businessmen and the public. Some critics thought that Nakasone's call for people to spend $100 on imports was a public relations ploy designed for American consumption, but many Japanese commentators considered it a reasonable and serious proposal. Despite charges that Japanese markets are closed, a wealth of American products are readily available in most Japanese cities and towns. Among them: B.F. Goodrich tires, Mercury outboard motors, Corning cookware, Kentucky Fried Chicken, Avon cosmetics, Simmons mattresses and Apple computers.

Everyone agrees that Japan must open its door to more imports, but the process is likely to be slow. If an impatient Congress retaliates against Japan and starts a trade war, no one will win. The Japanese will lose exports and jobs, while American consumers will suffer higher prices and shortages of popular imported products. President Reagan two years ago summed up his views about fighting protectionism with retaliation. Said he: "We and our trading partners are in the same boat. If one partner shoots a hole in the bottom of the boat, does it make sense for the other partner to shoot another hole in the boat? There are those who say yes and call it getting tough. I call it getting wet."

With reporting by Gisela Bolte/Washington and Edwin M. Reingold/Tokyo