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Trade Ties With Allies Going Sour : International commerce: U.S. refuses to negotiate with Europe over major contracts, and Japan is accused of reneging on semiconductor purchases.

March 13, 1993|JAMES GERSTENZANG | TIMES STAFF WRITER

WASHINGTON — The United States' trading relations with its chief economic allies slid further downhill Friday, as the White House refused to negotiate with Europe over millions of dollars in government contracts and accused Japan of undermining efforts to boost U.S. semiconductor sales there.

Two weeks after President Clinton said his Administration wants to base its trade relations more on competition than on a retreat from global economic ties, U.S. Trade Representative Mickey Kantor ordered aides not to take part in talks, scheduled for next week, that were intended to determine whether sharp U.S.-European differences over government purchases could be eased.

The two sides "are extremely far apart," a European trade official conceded. "There is no movement as far as we can see from the American side."

As a result, it is almost certain that a retaliatory course set in motion six weeks ago will go into effect a week from Monday. European firms will be barred from bidding on as much as $50 million worth of telecommunications projects in the United States.

Kantor also challenged the Japanese assertion that its failure to meet a target of buying 20% of its computer semiconductor chips from the United States stems from the failure of U.S. manufacturers to deliver the goods.

"There is no substantiation" for such an allegation, he said.

Asked whether the failure to meet the required figure would lead to U.S. sanctions against Japan, Kantor refused to say what course would be followed. But, he threatened, "we would consider it serious--a commitment not kept."

The latest developments reflect the Administration's emerging dual course on trade issues. On the one hand, it makes policy pronouncements favoring greater world trade and lowered barriers. But it then takes specific measures that signal a toughened approach to foreign negotiators and domestic political audiences.

"The ban will almost certainly go into effect," Kantor said, referring to the plan announced last month to bar the European companies from bidding on federal government contracts unless the dispute is resolved.

At the heart of the dispute are what the Administration sees as discriminatory new rules on the part of the 12-member European Community governing purchases of telecommunications and other utilities equipment.

But the European trade official, speaking on condition of anonymity, said, "The U.S. simply refuses to open up any bit of its telecommunications market."

The refusal to conduct the negotiations, he said, "shows very bad will altogether."

A spokesman for the European Community, Peter Doyle, complained: "It's a strange way of doing business."

Although the contracts immediately at stake involve the relatively small sum of no more than $50 million, much greater contracts, with a value about 10 times that amount and covering a wide range of European products and services purchased by the U.S. government, could eventually come into play.

Thus the case is being watched closely, both for financial reasons and also for the message it is sending about broader trade policies and the Clinton Administration's willingness to cooperate or play hardball in other trade disputes.

On Feb. 1, Kantor announced that unless the European purchasing rules were relaxed by March 22, the United States would:

* Prohibit purchase of European Community products not specifically subject to government procurement rules spelled out by the General Agreement on Tariffs and Trade, the international body given the assignment of regulating global trade.

* Seek public comment on possible further retaliatory steps.

* Consider withdrawing from the GATT procurement code, a step that would permit the United States to impose strict domestic content rules on a wide range of government purchasing.

On Friday, in a telephone conference call with a group of reporters, Kantor announced that he was ordering his negotiators to cancel plans to attend a meeting with their European counterparts next week. Another U.S. trade official said that transatlantic telephone conversations with EC officials in Brussels in recent days left the Administration convinced that the meetings would be fruitless.

The semiconductor dispute stems from a U.S.-Japanese agreement, reached in 1986 and renewed in 1991, that is intended to increase U.S. access to the Japanese computer market. Under the agreement, Japan was to purchase 20% of the chips needed for its computer industry from U.S. sources in 1992.

The figures for 1992 are expected to be announced next Friday, and are widely believed to fall short of the goal, although they are said to reflect an improvement above the 15.9% figure reported for the third quarter of last year.

A spokesman for the Electronic Industries Assn. said in Tokyo on Friday that American firms had canceled, reduced and delayed deliveries of millions of dollars of computer chips to Japanese firms.

Kantor said such an approach by Japan was simply intended to "shift the blame" away from a Japanese unwillingness to live up to the agreement.

"These arguments don't hold up," he said. "We're not going to stand by and let these charges be leveled. An agreement is an agreement, and we're going to stick by it and we expect the Japanese government to stick by it."

Times staff writer Leslie Helm in Tokyo contributed to this report.

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