US-Japan summit fails to avert: Meeting between Clinton and Hosokawa deadlocked over dollars 60bn trade imbalance

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THE PROSPECT of a calamitous trade war edged closer yesterday, as the US and Japan remained deadlocked over how to reduce the dollars 60bn ( pounds 48.8bn) trade imbalance between them. 'We just didn't make it,' said a disappointed President Clinton after three hours of talks at the White House with Japan's Prime Minister, Morihiro Hosokawa.

Seemingly, the dispute is merely one of procedure - on how to measure progress toward a common goal of increasing US exports to Japan, thus reducing the deficit which for more than a decade has soured relations between the world's two largest economies. But a six-month row over semantics symbolises a confrontation whose risks were plain even after the cautious words of both leaders last night.

While US officials warned of unilateral action if Tokyo did not fall into line, Mr Clinton indicated that no countermeasures would be taken immediately. 'We have to assess where we are. I've no idea what happens from here on in.' But he added that 'no agreement' was better than an 'empty' agreement which signified nothing.

At issue is the so-called framework agreement of last July, in truth more of an agreement to differ. The two sides have been squabbling over the nature of the 'objective criteria' that should be employed to measure the opening of Japan's markets to US imports in four key areas: cars and components, telecommunications equipment, insurance and medical equipment. 'We failed in all of them,' Mr Clinton acknowledged.

Tokyo wants to limit any understanding to measurement of what has has been achieved in the past, little more than glorified statistics; the Americans, however, insist the criteria must be clear, quantified targets for the future, which leave the Japanese no margin for ambiguity or equivocation.

For all the failures by previous administrations to break down Japan's trade barriers, the strong-arm tactics chosen by Mr Clinton, and their timing, have caused puzzlement among trade and diplomatic observers.

As the summit began, US officials paid ritual obeisance to the 'new relationship' they hope to forge with a new generation of Japanese leaders. But administration spokesmen held out only the smallest glimmer of hope that Mr Clinton and Mr Hosokawa could succeed where so much prior effort had failed. The delegations were talking until 4am yesterday, but to no avail.

For once, Japan's stance on a trade dispute is attracting some international sympathy. As Japan's first non-LPD Prime Minister, Mr Hosokawa offers the best hope of deregulation of his country's trading system. The growth in Japan's surplus reflects the recession. If that is to end, and Japanese imports are to grow more rapidly, much depends on the economic stimulus package Mr Hosokawa is trying to push through, amid much domestic political uncertainty.

Oddest of all is that the US, the proclaimed champion of free trade, is pushing for what amounts to a mercantilist, quota system for its trade with Japan. Toyko can point to the distortions caused by the last such experiment, the agreement that imports should account for 20 per cent of the Japanese market for semi-conductors. 'We do not want managed trade,' Mr Hosokawa said.

But Washington is unmoved. 'We will have to look at other alternatives' including sanctions, one official declared, 'because we can't live with the current situation.' This time, Mr Clinton hopes the Japanese will believe the US is not bluffing.

A vast swathe of the eastern US was at a standstill yesterday as a lethal mixture of snow, sleet and freezing rain descended on the region - the latest and perhaps most disruptive storm of the coldest winter for at least 12 years.

Forecasters warned of further snow or sleet from the Canadian border to the deep South, much of it on top of pack ice - a cocktail dubbed 'sleeze'.