U.S., Japan Reach 11th-Hour Deal

GENEVA -- After more than two years of bitter automobile trade talks, the United States and Japan reached agreement Wednesday, averting record U.S. trade sanctions which threatened to spiral into an all-out trade war.

"Today Japan has agreed that it will begin to truly open its auto and auto parts market to Americans," U.S. President Bill Clinton said in Washington. "This agreement is specific. It is measurable. It will achieve real, concrete results."

Aware of the high domestic political stakes, both sides claimed victory.

Clinton said Washington would now drop its threat to impose sanctions against $5.9 billion worth of luxury Japanese automobiles, due to come into effect midnight Washington time.

In return, Japanese Trade Minister Ryutaro Hashimoto said that Tokyo had dropped its complaint against the United States before the World Trade Organization -- the global trade policeman.

He appeared smiling and relaxed at a joint news conference with U.S. Trade Representative Mickey Kantor after virtually non-stop negotiations this week.

The agreement averts a potentially devastating trade war between the world's two top economies which would have undermined global business confidence and soured political relations. There had been indications that Japan would have retaliated against American products.

Clinton portrayed the deal as a triumph for the United States.

"This agreement helps to close the [trade] gap. This commitment means thousands of new jobs for American workers," he said.

At the heart of the dispute was the U.S. trade deficit with Japan, which came to $66 billion last year, more than half of that in the automotive sector.

"Today we have proof that hard bargaining and good faith can overcome apparently insurmountable conflicts," Clinton said.

Japanese Trade Minister Hashimoto said Tokyo had achieved its goals because the deal between the two governments excluded the specific numerical targets to measure the increase in sales demanded by Washington.

"I am pleased that with regard to numerical targets the Japanese stance that this is outside the scope of the government is maintained and we are able to maintain the principles of free trade and economy,'' said Hashimoto.

The government had rejected the numerical targets as being equal to quotas and managed trade and said it could not force companies to buy American products.

Instead of being dealt with in the accord, the problem of numerical targets was addressed by the private sector.

As soon as the accord was reached, major motor manufacturers in Japan announced "voluntary" plans to increase production and investment in the United States and use more American spare parts in vehicles assembled there. This was one of Washington's key demands.

For instance, Toyota said it would raise its North American production to 1.1 million units in 1998 from 900,000 units in 1996. It said it was considering building a new North American plant.

Clinton said the deal would increase Japanese purchases of car parts by almost $9 billion in three years, a 50 percent increase.

He said the number of dealerships selling non-Japanese cars would increase by 200 next year.

Washington had threatened to impose 100 percent tariffs on 13 Japanese luxury car models. That would price them out of the U.S. market, raising the cost of a Lexus LS480, for example, from $55,000 to well over $80,000.

"This agreement will not solve every problem in our relationship but we have proved that hard bargaining and good faith can overcome apparently insurmountable problems," Clinton said.

The tough trade stance was popular in the United States, where Clinton faces pressure from the Republican majority in Congress.

Japan for its part had wanted to stand up to Washington and was angered by the threat of unilateral sanctions -- a view shared by many countries since it bypassed the rules of the World Trade Organization, which was set up this year to solve international trade rows.