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In Japan, They Call It `Clinton Shock'


International Business

IN JAPAN, THEY CALL IT `CLINTON SHOCK'

Wilfred J. Corrigan, chief executive of LSI Logic Corp. and a director of the Semiconductor Industry Assn., is a staunch Republican. He doesn't like many of Bill Clinton's policies. But when it comes to Japan, he says, "the Clinton Administration is right on target." Corrigan's company and other chipmakers have benefited from Washington's help in reaching a 20% share of Japan's market over the past seven years, up from 8.6%. Corrigan figures the only way to deal with Japan is to be tough, turn up the pressure, and set quantifiable goals. "It's got to be measurable," he says. "Otherwise you get vague statements that things are going to get better."

That's what Clinton and his trade team think, too, and that's what they pressed for in mid-April when Prime Minister Kiichi Miyazawa visited the White House. Unlike previous Presidents, Clinton put economic issues front and center, ahead of traditional national security concerns. The tone was businesslike, and there was little of the usual banter. Rather than just exhorting Japan to open its markets, Clinton laid out a new menu of trade measures aimed at reducing a widening $50 billion deficit.

CLEAN BREAK. The Clinton policy marks a clean break with the past. It jettisons the notion that Japan will eventually emulate U. S. ways. Says Laura D'Andrea Tyson, chair of the Council of Economic Advisers: "Our view is, yeah, Japan really is different. Even the Japanese say . . . they have a different system of capitalism." So forget Carla A. Hills' velvet crowbar. Bill Clinton wants to wield a battering ram.

Already, U. S. Trade Representative Mickey Kantor is mulling punitive tariffs on Japanese imports if Tokyo's new $117 billion stimulus package doesn't result in purchases of U. S. supercomputers. Reflecting their new penchant for targeting specific industries, officials are also planning an assault on Japan's insurance market, hoping to get U. S. insurers a guaranteed slice. U. S. auto-parts makers are working with Washington to hold the Japanese to their promise to purchase $19 billion in U. S. parts by March, 1994. And the U. S. semiconductor industry is banking on Kantor's insistence on an average 20% share of Japan's chip market for all of 1993.

What's more, on Apr. 30, the Commerce Dept. may cite Japan for excluding U. S. construction companies from airport contracts. If Tokyo fails to agree to concessions within 60 days, the U. S. would bar Japanese companies from bidding on U. S. airport contracts. "Tough rhetoric is fine," says one Administration official. "But the Japanese have been feeding at our trough for 30 years. We have to show we mean it this time."

The combination of Clinton's policies, including pressure for a stronger yen (page 47), is being called "Clinton shock" in Tokyo, and Japanese leaders are resisting. Miyazawa flatly rejected market-share targets for U. S. goods, and Ministry of International Trade & Industry Vice-Minister Noboru Hatakeyama insists "we absolutely will not respond to unreasonable requests."

But once passions cool, the U.S. is prepared to be flexible on how it actually measures results. Among the options to be offered by U. S. negotiators: substituting less onerous export-growth targets for market-share goals and measuring the extent to which Tokyo adopts universal standards rather than ones unique to Japan. U.S. policymakers believe these choices offer enough room for compromise and note that Japan has accepted such other "managed trade" measures as voluntary restraints on auto and steel exports. "The Japanese have always shown an ability to adjust, and they will this time, too," predicts Senator Jay Rockefeller (D-W. Va.).

Even if the Japanese eventually swallow the new terms, the policy hasn't escaped criticism at home. Free traders are aghast. And others say Clinton is weak on follow-through and worry that when push comes to shove, the President will shrink from retaliation.

Japan may not like Clinton's strategy. But it may grow to appreciate the new clarity in U.S.-Japan relations. "There's no confusion anymore" between Congress and the White House, or the State Dept. and the trade representative, says Clyde V. Prestowitz Jr. of the Economic Strategy Institute. At last, the U.S. is singing out of one hymn book on trade. Japan may not like the words, but there's no mistaking the melody.Douglas Harbrecht and Amy Borrus in Washington, with Richard Brandt in San Francisco and Neil Gross in Tokyo


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