Daily summary of japanese press march 8, 2002

ARTICLES:

(1) U.S. steel tariffs: Japan groping for approach reflecting both soft and tough stances; Ready to take joint step with EU, ROK in appealing to WTO

NIHON KEIZAI (Page 7) (Slightly abridged)

March 7, 2002

Following the U.S. decision to impose tariffs on imported steel products as a safeguard measure for the domestic industry, the Japanese government will grope for an approach aimed at continuing the current cooperative policy line with the United States and preventing the spread of protectionism in the United States. In appealing to the World Trade Organization (WTO), Japan is ready to take a joint step with the European Union (EU) and the Republic of Korea (ROK) so that the relationship between Japan and the United States alone will not be spotlighted. However, as the domestic towel industry's call for restrictions on imports from China is growing louder, the Japanese government finds it difficult to boldly put forward a free-trade policy.
Foreign Minister Yoriko Kawaguchi yesterday issued a statement that read:
"I am worried about the possibility of the U.S. protectionist step having an adverse impact on sound trade."
Keidanren (Japan Federation of Economic Organizations) Chairman Takashi Imai (Nippon Steel Corporation chairman) criticized the U.S. tariffs in a press briefing yesterday:
"This is more serious than Japan's protectionist policy in the agricultural sector. The U.S., which has taken the lead in promoting free trade, should not resort to such a measure."
Based on the judgment that the U.S. decision is likely to violate WTO rules, the Economy, Trade and Industry Ministry has started discussion on the possibility of filing a complaint with the WTO.
The governments of Japan and the United States are slated to hold working-level talks in Washington next week. The Japanese side intends to ask the United States about the reason why it decided to impose tariffs. Both sides are also expected to confer on how to treat the measure of excluding products that the United States does not produce from the new tariffs.
The abuse of import restrictions contains the risk of intensifying a trade dispute as a result of drawing out trade reprisals. Since the Japanese government has advocated the free-trade principle, it cannot overlook the new tariffs imposed by the United States. Yet, the government apparently has an ulterior motive of avoiding a dispute with the United States.
During the Japan-U.S. summit on Feb. 18, President Bush expressed his support for Prime Minister Junichiro Koizumi, demonstrating their close ties. Japan-U.S. relations thus remain stable in general, but a live charcoal is still left to build a fire.
Toyota Motor Corporation and Honda Motor have increased exports to the United States, although the U.S. Big Three are suffering a serious business slump. The reconstruction of the Japanese economy has also been delayed despite U.S. calls for Japan's early recovery. The president's decision on the steel tariffs stems greatly from his political motives, eyeing the November mid-term elections. Japan therefore needs to work out response measures that will not shake the foundation of President Bush, who supports the Koizumi reform initiatives.
Even so, the possibility cannot be completely ruled out that the U.S. government has aimed at making use of criticism from various countries to soothe the protectionists in the United States. Japan needs to ascertain whether the United States has prepared such a scenario.
China's fierce reactions are also subtly changing the Japanese government's stance. The government has continued investigations to determine whether to impose a safeguard measure on towels imported from China. In the future, calls for import restricts might also come from other domestic industries.
(02030704ys)

(2) Editorial: Absurdity of steel import curbs by the United States

NIHON KEIZAI (Page 2) (Full)

March 7, 2002
In a bid to curb imports of foreign steel products, U.S. President Bush decided to impose safeguard measures for a three-year period. Contrary to the president's statement that the measure is for the sake of safeguarding free trade, the action is simply the continuation of protected trade in steel, which has been in place in the United States for the past 30 years.
The United States has frequently imposed emergency import curbs and taken the anti-dumping offensive. However, this is the first time for it to impose comprehensive restrictions on imports of steel, by adding levies of up to 30 percent on 14 major items. It is only natural for Japan and the European Union (EU) to file a complaint with the World Trade Organization (WTO) against this bailout measure aimed at patronizing the entire industry.
The measures openly display the United States' egoism, unbecoming to a country that advocates free trade. The hit list does not include Canada and Mexico, for they are members of the North American Free Trade Agreement (NAFTA). Steel slabs American manufacturers import from those countries are in effect free of levies.
The measures also include government assistance for pension and insurance payouts to retirees in response to a call from the steel industry. Such payouts by the entire industry reportedly top 10 billion dollars, working as a drag on major steel makers' efforts to regain a competitive edge and the reorganization of the industry.
The problem is that it is unlikely that the U.S. steel industry's competitiveness will recover with this protective measure. Over the past four years, 31 manufacturers have filed requests for the application of the Federal Bankruptcy Act. This is the cost the United States has to pay for its dependence on protectionism and negligence in pursuing technological development and capital investment.
U.S. steel market conditions have already soared 20 to 50 percent, compared with late last year. The import curbs this time around will further boost market conditions, giving an ample breathing space. The view is prevalent that if steel manufactures recover their income earnings, industrial reconstruction will come to a halt and the import curbs will not lead to a recovery of competitiveness.
Because the negative reaction from the European Union and Japan toward the United States is growing, this will also affect a global effort for the reduction of crude steel production facilitated by the Organization for Economic Cooperation and Development (OECD) at the initiative of the United States.
The safeguard measure this time will not take a major toll on Japan's steel industry, for steel exports to the United States have plunged from 7 to 2 million tons over the last four years due to anti-dumping duties. Japan's steel industry is in the grip of the recession. Five blast furnace companies are in the process of reorganizing into a two-company system. We want them to revitalize themselves through self-help efforts, using the case of the U.S. steel industry as an example of what not to do.
(02030703yk)

(3) Editorial: U.S. slaps tariffs on steel imports; Matter should be settled by WTO

ASAHI (Page 2) (Full)

March 7, 2002

The Bush administration has decided to invoke emergency import curbs (safeguards) on steel imports.
Many U.S. steel makers have gone bankrupt in recent years. The import curbs were necessary in order to create an environment where U.S. steel can vie with cheap imports under the same conditions, according to the U.S. government.
Europe and Japan have repeatedly explained that the long slump of the American steel industry was not traceable to foreign steel but to its low competitiveness.
The European Union and the Japanese government are considering taking the U.S. decision to the World Trade Organization (WTO). We think the matter should be settled by the WTO.
The U.S. government has repeatedly taken anti-dumping measures since steel imports from Japan and other countries began to grow in 1998.
As a result, imports from other countries dropped sharply. For instance, Japan's exports to the United States in 2001 dropped to one-third the level of 1998. Chiefly Japan has been exporting products that are not produced in the United States.
The step this time is designed to net all steel exporters at once instead of naming individual countries.
The WTO allows such an approach only when there is an imminent danger that growing imports will seriously damage a domestic industry. The U.S. steel industry does not fit that category in the eyes of Japan and Europe.
Furthermore, steel users in the United States, such as the automobile industry, fear adverse effects on their products.
Saddled with excessive production facilities, the steel market has been stagnant worldwide. Above all, the American blast furnace industry has been in a serious slump.
Strong labor unions did not allow scrapping facilities and delayed restructuring. The steel industry is trapped in the vicious cycle of heavy pension and medical payments, small capital investment, and weak competitiveness.
The steel industry has a reputation for its strong connections with politicians. Legislators elected from steel states have vehemently called for the invocation of safeguards. The U.S. government's decision mirrors some consideration for the midterm election in the fall.
Another condition is attached to the application of safeguards, that is, when there is a good chance for a domestic industry to regain competitiveness or for the industry to carry out structural adjustment.
A merger plan involving leading American firms surfaced late last year. The United States is lagging behind Europe and Japan when it comes to mergers and realignments of steel makers. It is undeniable that protective steps, such as anti-damping measures, have dulled the industry's independent efforts.
Last year Japan stopped short of invoking an emergency import curb on three farm products from China, including leeks. The circumstances are different between Japan's farm products and America's steel, but there seems to be something in common: a desperate attempt to buy time with no remedies for rebuilding the industry.
As a country long enjoying the benefits of free trade, Japan should take a resolute stand in dealing with the United States and never do anything that would draw criticism from other countries.

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(02030704st)

(4) Budget now expected to get Diet approval, but Koizumi government awaited by difficult problems

ASAHI (Page 4) (Slightly abridged)

March 7, 2002
The budget for fiscal 2002 is now expected to get through the Diet. The government and ruling coalition, while seeing through economic developments, will grapple with the task of legislating antideflationary and emergency defense measures during the latter half of the current Diet session. However, the question of "politics and money," which was in focus during the first half of the current Diet session, will also likely have its aftereffects on the Diet session. The Diet has now decided to summon Muneo Suzuki, a House of Representatives member with the ruling Liberal Democratic Party, as a sworn witness for its March 11 hearing over his reported suspicions. With his Diet summons ahead, however, the opposition parties are on the offensive. Also, the public prosecutors will shortly indict a former representative of LDP lawmaker Koichi Kato's office. The Koizumi government is now about to enter a crucial phase.
"Economic recovery is the first thing. We also have a lot of diplomatic issues. But the most important thing is to rescue the domestic economy, I think." This comment came from Prime Minister Koizumi when he was asked by reporters about the Diet's role from now on after the Lower House's passage of the budget bill.
The government plans to launch an additional package of antideflation measures, but now that the budget is expected to get the Diet's approval, ruling coalition lawmakers will likely call for a policy switch of increasing public spending on economic pump-priming measures. Prime Minister Koizumi intends to uphold the 30-trillion-yen cap of government bonds, but ruling party lawmakers will also likely call for a supplementary budget.
The Council of Economic and Fiscal Policy (CEFP) will also enter into discussions tomorrow on a drastic reform of the tax system as a showcase of the planned antideflation package. Heizo Takenaka, state minister for economic and fiscal policy, is going to clear up the point at issue within the month. The focus will be on an early review of the inheritance and gift taxes.
On the other hand, government ministries and agencies are now still in coordination over emergency defense legislation to introduce a package of legislative measures. The government will likely come up with an outline of emergency legislative measures within the month. The prime minister, while trying to pave the way to economic recovery, wants this long-pending emergency defense legislation enacted into law. And then, the prime minister wants to recover public support for his cabinet as it has nosedived with his dismissal of former Foreign Minister Tanaka.
However, the Diet summons of Suzuki is a primary matter of concern to the government and ruling coalition. Additional suspicions are now likely to be floated about him, and many in the ruling parties are therefore voicing their concerns. "The way things are going, the Koizumi Cabinet will be a failure," says a veteran lawmaker with the Eto-Kamei faction in the LDP. The opposition camp is now certain to demand Suzuki's resignation from his Diet membership. How will the ruling coalition settle this problem?
In addition, there are also suspicions about a former representative of Kato's office. Kato and Prime Minister Koizumi and LDP Secretary General Taku Yamasaki used to stage their close ties as the so-called YKK trio. Depending on how the prime minister and Yamasaki will handle this problem, the Diet session could become tangled. Moreover, such could further damage the respective images of the Koizumi administration and LDP.
(02030703im)

(5) Government decides to raise sunken mystery ship in May at earliest

YOMIURI (Top play) (Lead paragraph)

Evening, March 7, 2002
The government decided today to raise the unidentified ship that sank in China's exclusive economic zone (EEZ) waters in the East China Sea in December last year [after a shootout with Japan Coast Guard patrol vessels]. The sunken mystery ship, believed to be North Korean, will be salvaged in or after May when divers complete their underwater probing. China remains cautious about raising the ship. However, the government thinks it necessary to take appropriate action in order to conduct a thoroughgoing criminal investigation. The government, while watching China's reaction, will make a prudent decision when to raise it.
(02030704im)

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