U.S. negotiators failed to persuade Japan to extend a five-year auto trade agreement that expires Dec. 31, raising the prospect of increased trade friction between the two countries as President-elect George W. Bush takes office. In a conference call with reporters, U.S. trade officials said Japan made a potentially "dangerous" mistake by refusing to extend the 1995 agreement, which established a framework for measuring progress made by Japan in opening its auto and auto-parts markets to foreign imports. U.S. auto-parts companies and the United Auto Workers union have been particularly vocal in pushing for a new agreement, arguing that sales under the 1995 pact have failed to live up to expectations because of Japanese trade barriers. For the talks in San Francisco, the United States shelved its proposal to strengthen the expiring agreement and asked instead for a one-year extension to give both countries more time to consider the issue. But Japan, arguing that changes in the global auto industry have made the pact obsolete, rejected that idea as well. Japan proposed instead a new set of talks with the United States to discuss how a wave of mergers and acquisitions since the 1995 agreement have changed the global industry.