The U.S. and Japan unveiled a trade agreement Saturday that postpones tackling the tough trade issues that still divide the world’s two leading economies.
The agreement put off for future negotiations any compromise that would create specific numerical targets for reducing the $50 billion trade deficit with Japan. The Japanese have opposed the concept as “managed trade.”
U.S. officials expressed hope the agreement could set the stage for the sort of results-oriented trade policy that President Clinton has been seeking in tense bilateral negotiations with Japan.
The agreement provides a framework for future talks that will take place over the next year, but it avoids specific measurements of progress in reducing the Japanese trade surplus that U.S. negotiators had been seeking for months.
The accord’s vague language contains a pledge by Japan to “promote a significant increase in global imports of goods and services, including from the United States.” The U.S., for its part, promises to “substantially reduce its fiscal deficit, promote domestic saving, and strengthen its international competitiveness.”
The development was announced jointly by Clinton and Japanese Prime Minister Kiichi Miyazawa as Clinton ended his five-day visit to Japan for the economic summit.
“We should have no illusions,” Clinton told reporters later Saturday. “We announced today a framework to govern specific agreements yet to be negotiated. Negotiating those agreements will surely be difficult.
“But now at least we have agreed what the outcomes of these negotiations need to be-tangible, measurable progress.”
Miyazawa, who shared a sushi dinner with Clinton Friday night, stressed Japanese expectations. “This agreement is aimed at reducing the Japanese trade surplus and reducing the U.S. budget deficit,” he said.
The agreement, reached just hours before Clinton flew to South Korea, sets an outline for negotiations that will take place no matter what the outcome of Japan’s national election July 18.
Clinton is expected to use the accord to pressure Congress to pass his economic plan when he returns to Washington.
Since April, the U.S. side had been pushing for numerical benchmarks for measuring progress both in reducing the overall trade deficit and to gauge progress in penetrating specific markets such as telecommunications and computers where U.S. firms are considered globally competitive. They failed on both accounts.
The accord states only that Japan would pursue “a highly significant decrease in its current account surplus, and at promoting a significant increase in global imports of goods and services, including from the U.S.”
Japan officials interpret the accord as a non-binding agreement. For them, it represents a goal, not an obligation.
U.S. negotiators tacitly endorse that view. “This is not a contract,” said W. Bowman Cutter, deputy assistant to the president for economic policy. “Both countries have made promises. The important question would be if there was an absence of good faith in achieving the results.”
The agreement does accept the U.S. choice of five sectors slated for future talks: government procurement, especially of computers, satellites, medical technology and telecommunications; regulatory reform; cars and auto parts; foreign investment in Japan; and implementation of existing agreements.
Japanese officials from the powerful Ministry of International Trade and Industry played down the document’s significance. “There will be no more semiconductor accords,” one said.
That comment referred to the 1986 U.S.-Japan semiconductor agreement, which contained language calling for the U.S. to achieve a 20 percent market share, up from 8 percent at the time. The 20 percent benchmark finally was achieved last year.
Many observers consider that agreement the most successful U.S. market opening initiative ever negotiated with Japan. Hated by Japanese bureaucrats, it served as a model for the U.S. negotiating team’s efforts to seek numerical indicators in other market sectors.
White House officials admitted Saturday that future talks conducted under the framework might not achieve those results. “There’s a lot here that is subject to interpretation,” said David Gergen, counselor to the president.
The agreement caught some economic analysts by surprise because for a week White House officials had been playing down hopes.
News of the bilateral framework spread as Clinton ate breakfast with Russian President Boris Yeltsin and discussed another major U.S. objective at the summit meeting-finalization of an international aid package for supporting market reforms in Russia.
After months of disagreement over the size of the package, the world’s seven biggest industrial nations agreed to assemble a $3 billion fund, $1 billion less than Clinton had pledged to Yeltsin in April but $1 billion more than allies were willing to ante up only days ago.
