The White House has backed down from a much-heralded plan to penalize the next generation of Japanese semiconductor imports if the government finds Japan is now selling computer chips below their market value, administration sources said yesterday.
A ranking White House aide said Commerce Secretary Malcolm Baldrige overstepped the authority given him by President Reagan by threatening computer memory chips still on the drawing boards. The aide said Baldrige was authorized only to investigate charges that Japanese companies were "dumping" existing chips -- selling them for less than their cost of production to capture a major share of the American market.
Memory chips are a key element of computers and telecommunications systems. While the United States once was the world leader, Japan began to dominate the market in the late 1970s.
Baldrige, who has been in Moscow and Brussels all week, was unavailable for comment. But Commerce Department aides who had been in contact with him asserted last night that Baldrige still believes that his announcement a week ago followed the president's directions and that he will defend his position at the White House Monday. The Commerce aides blamed the White House reaction on a lack of understanding of the technicalities of U.S. trade laws.
Commerce sources said extending penalties to future generations of chips is "routine" and is part of a dumping investigation initiated by a domestic company, Micron Technologies of Idaho. The only difference, the sources said, is this investigation was started by the White House.
The White House reacted after aides there were subjected to heavy lobbying all week by lawyers for the Japanese industry who wanted to narrow the scope of the possible penalties.
"We made all kinds of representations on behalf of the Japanese," said William Walker, an attorney with the New York and Washington firm of Mudge Rose Guthrie and Alexander. He added that the Japanese felt Baldrige was being "excessively aggressive" in trying to include future generations of computer chips in the investigation.
In announcing the investigation at a press conference last Friday, however, Baldrige stressed that he was operating with the full authority of the president. He said that the investigation and the extension of penalties to future generations of computer chips was the first recomendation of a new "strike force" to seek out unfair trade practices, and had been approved by Reagan and his top economic advisers. He made the same points in a breakfast meeting with reporters the day before.
An announcement due to be published in the Federal Register last week, moreover, said the investigation includes memory chips that "are being, or are likely to be, sold in the United States at less than fair value." That notice suddenly was withdrawn, but not before a copy was sent to Paula Stern, head of the International Trade Commission, which will take part in the investigation.
White House sources, nonetheless, insisted that Baldrige had authority only to open an investigation of dumping of 256K computer memory chips and not to extend the case to future generation one-megabit and 4-megabit chips. "You can't have dumping on a product that doesn't exist," said one key White House aide.
The problem has symbolic as well as practical importance for both Japan, America's major Pacific ally, and the U.S. semiconductor industry, now in danger of being totally eclipsed by the Japanese in world and domestic markets.
The Japanese were especially upset when Reagan decided to open the semiconductor investigation on his own authority, without the filing of an industry complaint.
They viewed the presidential initiative as presuming they are guilty of unfair trade practices and felt the investigation should not have been announced while the two countries were trying to negotiate a solution to other trade complaints brought earlier by U.S. companies.
The U.S. industry, in deep financial trouble, argues that Japan denies American products access to its markets while dumping chips in this country to capture U.S. sales. Industry sources have estimated that American companies have lost close to $1 billion in the hotly contested 256K-chip market, which Japan is close to controlling.
The American companies insist they can never recover those losses unless Japan is forced to pay a penalty on sales of future generations of chips.