A senior U.S. trade negotiator told Congress yesterday that Japan has drafted new regulations that would continue to prevent U.S. companies from competing in its telecommunications market.
The testimony by Undersecretary of Commerce Lionel H. Olmer brought immediate threats of retaliation from key Republican members of the Senate Finance Committee. Sen. John H. Chaffee (R-R.I.), one of strongest free trade advocates in Congress, called for a U.S. ban on all Japanese telecommunications equipment if the draft regulations remain restrictive.
The draft regulations, which are scheduled to go into effect April 1, are designed to open the Japanese telecommunications market to private competition. Japan, like the United States last year, is ending its government monopoly over that nation's telephone service.
Olmer told the trade subcommittee of the Senate Finance Committee that the current negotiations over the telecommunications market have become a litmus test of Prime Minister Yasuhiro's commitment to President Reagan to give highly competitive American products equal access in Japanese markets.
Olmer said he had an advance look at the proposed regulations in Tokyo this week and that they work against U.S. suppliers through "a cumbersome and inherently discriminatory system" that remains largely under the thumb of Nippon Telegraph and Telephone (NTT), the former government monopoly.
The restrictive nature of the draft regulations "lends fuel to a growing international perception that despite political statements to the contrary, Japan remains committed to keeping its market protected from foreign competition," added Olmer, who returned Thursday from the talks in Tokyo.
Olmer's testimony was unusually frank, especially since negotiations are still under way, and were seen as a way of impressing the Japanese with the seriousness of U.S. resolve on the issue. Olmer said his statement in Tokyo Wednesday that he was "encouraged" by some progress in the talks had given the Japanese the false idea that the United States was satisfied with the small steps they had taken.
As an indication of the seriousness with which the United States' $36.8 billion trade deficit with Japan is regarded on Capitol Hill, seven senators attended the hearing -- an unusually large number for a Friday when the Senate is out of session.
The senators responded to Olmer's testimony by pressing for retaliatory action, including the Chaffee proposal.
"I think it would pass the Congress and reach the president's desk within two weeks. That's the attitude here," said Chaffee.
"That's the ultimate weapon," commented Olmer.
"It's really draconian," replied Chaffee.
Olmer suggested as a "useful instrument to achieve reciprocal action" the quick congressional passage of a revised telecommunications trade bill, sponsored last year by Sen. John C. Danforth (R-Mo.). That bill would use Japan's $2.1 billion in telecommunications sales in the United States as leverage to pry the Japanese market open for American products.
The Reagan administration for the first time has begun studying possible retaliatory moves against Japan if the April 1 regulations fail to end discrimination against American telecommunications sales, senior administration officials said. The study has the approval of Treasury Secretary James A. Baker III and Commerce Secretary Malcolm Baldrige, and was discussed Thursday by a Cabinet-level committee.
Until now, the administration stance was to trust Nakasone's pledge that the April 1 regulations would allow equal access to U.S. suppliers.
Danforth, chairman of the trade subcommittee, suggested the administration call a meeting of all countries that suffer from Japanese policies that restrict imports since "Japan has become a global trade problem."
But Sen. Spark M. Matsunaga (D-Hawaii) challenged Danforth, saying the subcommittee chairman had "never learned from history. That's what we tried to do before World War II," Matsunaga said.
Olmer and Deputy U.S. Trade Representative Michael B. Smith also opposed the Danforth suggestion.
In his testimony, Olmer contrasted the free access Japanese telecommunications products have to the United States with the bureaucratic and regulatory roadblocks that Tokyo's draft regulations will throw in the way of American manufacturers trying to sell in Japan.
He said U.S. companies will have to work through "a maze of approving authorities" that includes NTT in the area of digital equipment, where the United States is considered the world leader. In all, those restrictive regulations will cover 94 percent of equipment sales where U.S. companies think they have a competitive advantage.
"NTT will start out with automatic approval for its services," Olmer said. "Potential foreign competitors will have to begin at square one and submit information which may be of a proprietary nature before they get initial approval."
Any minor changes, including increases in sales projections, will require new approval, he added.
In contrast, Japanese suppliers are allowed by the United States to submit a statement that their equipment meets Federal Communications Commission requirements, which are limited to those needed to prevent harm to the nation's telecommunications network.