Trading Punches

By DAN GOODGAME WASHINGTON

When the Clinton Administration last week uncorked a tough new approach aimed at cracking Japan's trade barriers to computers, auto parts and other imports, top officials in Tokyo immediately rejected the policy as "unrealistic." To which Laura D'Andrea Tyson, chair of the President's Council of Economic Advisers, calmly remarked to a colleague, "That's good. It shows they fear that we're on to something that will get results."

Or so Tyson hopes. The new policy, which demands that Japan increase imports of specific products and services, is inspired in large part by her provocative ideas and research, as laid out in her 1992 book on trade and technology, Who's Bashing Whom: Trade Conflict in High-Technology Industries (just published, incidentally, in Japanese). Using case studies in industries ranging from electronics to aerospace, she shows that U.S. products that outperform their Japanese competitors in impartial "third markets," such as those in Europe, are persistently blocked in Japan by officials and business executives.

In her book, and in White House strategy sessions over the past two months, Tyson, 45, has argued that if America is to create and keep high-wage jobs, as Bill Clinton promised during his campaign, it cannot blindly rely upon what she sometimes terms "the so-called free market." By that she means one in which U.S. workers and managers must compete against foreign firms that benefit from trade protection and government subsidies for everything from new-product development to health insurance.

Instead, she argues, the U.S. must employ federal subsidies and assertive trade policies to promote the most promising high-tech industries, such as aerospace and electronics, and defend them from subsidized foreign competition. "Our approach is to say to our trading partners, 'If you continue to subsidize your high-tech industries, we will do the same,' " she says. The Clinton Administration also "will demand that our trading partners open their markets to our exports as ours are open to them . . . That's a lot more constructive than saying, 'We're going to close our markets to your products.' "

This approach was spelled out last Monday at a private White House meeting, where Clinton's top trade officials delivered an outline of their new policy to a clearly unhappy Japanese Ambassador Takakazu Kuriyama. Clinton's policy asks Japan to reduce its record $132.3 billion global trade surplus ($49.6 billion with the U.S. alone) one-third to one-half by 1996 and to increase its imports of manufactured goods one-third. It also describes key areas in which the U.S. expects Japan to show "measurable" progress. Among them:

-- Purchasing non-Japanese auto parts, especially by Japanese auto factories located in the U.S.

-- Opening access for U.S. and other foreign financial-services firms to the heavily regulated Japanese banking, investment and insurance industries.

-- Increasing Japanese-government procurement of foreign manufactured goods and services, such as U.S.-made supercomputers and construction and engineering services.

The U.S. does not threaten immediate retaliation if its market-opening goals are not met, but intends to "keep score" through such indicators as how much market share certain highly competitive foreign products and services command in the Japanese market. This approach showed success last year, when Japan grudgingly achieved a U.S.-set target of 20% market share for U.S. semiconductor exports, which dominated the market everywhere in the world except Japan.

Japanese leaders and industrialists hope to prevent the semiconductor precedent from spreading to other industries -- as do some U.S. experts, who fear that the aggressive trade policy pressed by the Clinton Administration may lead to an escalation of trade barriers worldwide. "If the U.S. sticks to the setting of numerical targets," says Foreign Minister Kabun Muto, "it will be difficult to work out a framework for comprehensive talks."

Nonetheless, the first U.S.-Japan talks to set such targets began last Friday in Washington. And President Clinton strongly endorses the new approach. "Once we get the budget out of the way," Clinton told TIME last week, "our economic policy is going to be more micro," that is, more focused on "targeted investment in promising technologies" and on "opening markets abroad" for specific industries in which the U.S. stands to create thousands of new jobs. Predicts Clinton proudly of his economic adviser: "That's where Laura is really going to shine."

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CAPTION: U.S.-JAPAN TRADE GAP

With reporting by Edward O. Desmond/Tokyo