The preliminary agreement to settle the trade fight between the U.S. and Japanese semiconductor industries has produced more uncertainty than enthusiasm among U.S. observers close to the negotiations.
"It still seems to be a mess," asserted former Commerce undersecretary Lionel Olmer, who was the principal American negotiator on high-technology issues until he left the government a year ago.
Olmer pointed out that many key issues, such as Japanese semiconductor trade practices with other countries that ship to the United States and access to Japanese markets, remain unclear.
The agreement, hammered out during a 14-hour negotiating session between U.S. Trade Representative Clayton Yeutter and Japanese Minister of International Trade and Industry Michio Watanabe on Wednesday, sets a "framework" for detailed negotiations to resolve many of the complaints by U.S. semiconductor companies about unfair Japanese trading practices.
The agreement calls for a "doubling of the U.S. share of the Japanese market" to 20 percent within five years, said Jerry Crowley, president of Oki Semiconductor, a subsidiary in Sunnyvale, Calif., of the Japanese electronics company.
Japan also will set up a price-monitoring system "in a format and periodicity to be determined next week," to assure that there is no selling of chips below cost, known as dumping, Crowley said.
In turn, the United States will agree to suspend virtually all of its trade actions against Japan in semiconductors -- including determinations that Japanese companies were dumping high-density memory chips and erasable programmable memory chips.
While the Semiconductor Industry Association declined to comment on the agreement until the details are final, several observers said they believe it will prove to be a stopgap measure that offers only a temporary respite for America's troubled semiconductor manufacturers.
"What I think the agreement wants to try to do is raise the sale price in the U.S. of volume products to what are considered fair market prices with the intent of attracting new American investment back into them," said John Zysman, director of the Berkeley Roundtable on the International Economy, who follows the chip industry. "I think it is an attempt to provide a floor price."
However, Oki's Crowley pointed out that there is still disagreement between U.S. and Japanese negotiators on how to determine a fair price for Japanese-made chips and uncertainty on how to monitor compliance. U.S. companies, not trusting the Japanese, wanted the Commerce Department to monitor chip prices. For example, it is unclear whether Japanese companies simply could sell cheap chips to an intermediate country such as Malaysia, which then would resell them at a discount in the United States.
But an increase in chip prices -- combined with the rise in the value of the yen -- should make U.S. chips more price competitive with Japanese chips in the United States.
Similarly, the yen's climb makes U.S. chips cheaper for Japanese buyers. But there is great skepticism about Japan's willingness to adhere to a purchase agreement.
"I hate to be cynical, but there is always some excuse," said William H. Davidow, formerly Intel Corp. vice president. The Japanese "have these weasel-word clauses in these agreements. I would want to understand the qualifications in this commitment."
"The issue of access to the Japanese market is complicated by the question that you can't specify what the Japanese will buy," Berkeley Roundtable's Zysman said. "How do you define the quota?"
He pointed out that the semiconductor industry is being asked to give up a certainty -- penalties on the Japanese for dumping -- in exchange for a promise of increased access to Japan and possibly higher chip prices.
Even the Electronics Industries of Japan's lobbyist William Tanaka sees the agreement as a stopgap measure rather than as the cornerstone of a long-term agreement. "If I'm a semiconductor manufacturer, I would like to have some breathing room for a couple to three years to get my act together," he said. "This may do that."