TOKYO — Talks on opening Japan's construction market to U.S. companies hit an impasse Friday, making it likely that the United States will impose trade sanctions against Japan for the first time in four years.
U.S. and Japanese negotiating teams remained far apart after a last-ditch effort to resolve a yearlong dispute over the number and quality of Japanese public works projects that U.S. construction firms would be given an equal opportunity to bid on, J. Michael Farren, U.S. undersecretary of commerce for international trade, said at a news conference Friday night.
Japanese construction contracts are often awarded under an illegal but widely tolerated \o7 dango, \f7 or bid-rigging system that guarantees domestic firms sizable and profitable business.
"What is on the table now the U.S. negotiators are not prepared to accept," he said. "Negotiations are at an impasse."
There was a chance the Japanese side might propose an acceptable deal before Farren left Tokyo today, but the chances appeared slim, he said.
The Japanese had improved their offer to 14 or 15 projects but had rebuffed U.S. demands to add five to seven now and five future projects, he said.
Failure to reach agreement by midnight Washington time would trigger U.S. sanctions against Japanese construction firms doing business in the United States, he indicated.
Procedures to implement the sanctions under Section 301 of the Omnibus Trade Act were set in motion at the beginning of the month by U.S. Trade Representative Carla Anderson Hills.
If imposed, the sanctions will swiftly put about $25 million in federal projects off limits to Japanese firms, he said. Over the year, the amount would run to $100 million, he estimated, an amount he said was roughly equal to U.S. business in the entire Japanese construction field.
That was a small proportion of the $2.5 billion in business that Japanese construction firms are doing in the United States, Farren conceded. But sanctions would have a chilling effect on Japanese opportunities in the private sector as well, he predicted.
The sanctions would be the first imposed against the Japanese since then-President Ronald Reagan levied $300 million in punitive tariffs against Japanese electronics products in 1987 for violations of an accord on semiconductors.
The Japanese have said that if sanctions are imposed on construction work, they will abrogate the 1988 Major Projects agreement, which has opened 17 Japanese public works projects to foreign bidding under special procedures designed to guarantee fairness in contract awards.