As the latest, and presumed final, deadline looms, negotiations between the United States and Japan on semiconductor trade issues were scheduled to resume today in Washington.
The talks have been held sporadically during the past year, and previous deadlines have been missed, but participants and industry observers have said they believe that this round will produce a settlement. A July 26 deadline has been set by the office of U.S. Trade Representative Clayton Yeutter, but by most reckonings, a settlement could come as late as July 31 and still meet the legal requirements.
The negotiations are tied to three separate complaints against Japanese makers of semiconductors, or integrated circuits. The cases seek to end "dumping" of Japan-made computer chips on U.S. markets--that is, selling the tiny electronic components at less than it cost to make them, or for less than they are sold in the home market. Also, the negotiators have wrestled with U.S. companies' demand for greater access to Japan markets for chips--part of a broad unfair trade practices complaint filed by an industry trade group.
When the most recent round of talks ended July 3, the U.S. Commerce Department agreed to a tentative suspension of a final ruling in two dumping cases, pending the outcome of the negotiations. Preliminary findings in those cases have ruled that the U.S. industry has been injured by Japanese dumping.
Apparently, the Japanese have agreed in the talks to implement non-dumping pricing policies, and the Japanese government has said it is willing to encourage greater purchases of U.S.-made chips by Japanese companies.
But officials of the government agencies and industry groups involved in the negotiations have indicated there are two major sticking points to a final agreement: a system to monitor pricing and share-of-sales agreements, and the issue of third-country chips--that is, chips made by Japanese companies, built into products in another country, and shipped to the United States as part of finished or semi-finished goods.
Both sides have displayed rigid postures. The Commerce Department insists that unless the agreement satisfactorily addresses the issue of market access, the holds will be lifted from final rulings in the dumping cases. If early rulings in the cases were to be upheld, the Japanese companies would have to pay stiff duties on the chips.
Word of Warning
Also, Yeutter's office has warned that President Reagan has wide-ranging retaliatory powers that could be brought to bear in conjunction with the unfair trade practices complaint. Reagan must announce his intentions in regard to that case by July 31. Similarly, the two dumping cases must be resolved or suspended by Aug. 1.
The Japanese have been formidable negotiators, according to members of the U.S. team. At a news conference last Thursday in Tokyo, Minister of International Trade and Industry Michio Watanabe seemed to presage continued tough going for today's resumption of talks.
"It will be very difficult," Watanabe said, "for the Japanese government to control products made in third countries which are shipped to the United States."
He also referred to the sticky issue of how to measure increased participation of U.S. companies in the Japan market. "Because Japan is a free economy," he said, "the Japanese government cannot guarantee a share for U.S.-manufactured semiconductors in Japan. The government can and will make supreme efforts, through administrative guidance, to persuade major users of semiconductors to purchase more American semiconductors."
The free-trade issue is only one of the many dimensions of this complicated situation. Among other things, the technology of computer circuitry has evolved rapidly and the products have ever-diminishing life cycles.
The first of three anti-dumping cases involving semiconductors reached its deadline while the trade talks were still at an impasse. That case involved a kind of memory chip called a 64K RAM chip. As a price war continued to eat into margins on the chip, most U.S. companies abandoned that segment of the market to the Japanese. Following a determination of dumping and injury, duties were imposed and since then other market factors have combined to restore some price competitiveness for the few U.S. companies still making the 64K chips.
Competition Has Spread
However, technology advances have made the 64K chip less significant in the overall market, and the stiff competition has spread to other market segments. The other two anti-dumping cases involve more sophisticated and larger-capacity memory chips.