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Semiconductor Makers Press for Hard Line on Japan : Immediately End Dumping or Risk Trade Pact, They Say

November 06, 1986|DONNA K. H. WALTERS | Times Staff Writer

American makers and buyers of semiconductors are pressuring Reagan Administration officials to take a hard line against what they charge are repeated and flagrant violations of the two-month-old trade agreement with Japan.

Unless they see an immediate end of "dumping" of Japanese-made chips in Southeast Asia and Europe, industry officials said, they will ask U.S. officials to scrap all or parts of the hard-won pact.

The industry's concerns are expected to top the agenda when officials of the U.S. Commerce Department and Trade Representative Clayton K. Yeutter's office meet in Tokyo next week with their Japanese counterparts in scheduled "consultations" about the semiconductor pact.

The five-year agreement calls for Japanese makers of chips to end predatory pricing in the United States and for the government in Tokyo to encourage Japanese chip buyers to purchase a greater share of their chips from U.S.-based manufacturers. American officials say the Japanese are responsible for preventing activities that would undermine the agreement--including dumping of chips in markets outside the United States.

American firms expressed their concerns about violations of the pact in meetings last week with Commerce officials and in a letter from the Semiconductor Industry Assn. to Ambassador Michael Smith in Yeutter's office. Smith and S. Bruce Smart, undersecretary of commerce for international trade, conveyed those views to Japanese trade official Makoto Kuroda in preliminary meetings last week.

'Outright Violations'

The industry's "first experience under the agreement has been one of outright violations by Japanese companies in third-country markets and their home market and failures by the Japanese government to enforce the agreement adequately," the American industry association's George Scalise wrote in the letter.

U.S. companies have said Japanese chips continue to be sold at below fair-market value in Japan and in the third-country markets--those other than Japan and the United States--thus setting up a three-tiered price structure. According to the agreement, prices of Japanese-made computer chips sold here must meet or exceed fair-market values set by the Commerce Department.

But U.S. chip users say their overseas competitors are still getting bargain-basement rates for chips made in Japan, while they are forced to pay the higher prices determined by the fair-market values. That continues to hamper their competitiveness in markets already riddled with cutthroat pricing strategies, they say, warning that they may be forced to move manufacturing offshore to take advantage of lower-priced components.

U.S. officials are still taking a moderate approach to the upcoming talks. They are reluctant to request formal consultations under emergency conditions provided in the pact because if the problem were not resolved in rapid fashion, it could lead to dissolution of all or part of the trade agreement.

One industry source said the American officials are embarrassed that the agreement is not yet working. When the pact was initially reached in early July and signed in September, the United States agreed to suspend two dumping cases and one charge of unfair trade practices against Japanese semiconductor makers.

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