[Congressional Record Volume 140, Number 148 (Wednesday, November 30, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: November 30, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
              UNITED STATES-JAPAN TRADE AND SUPERCOMPUTERS

                                 ______


                         HON. MARTIN OLAV SABO

                              of minnesota

                    in the house of representatives

                       Tuesday, November 29, 1994

  Mr. SABO. Mr. Speaker, our discussion today concerning the Uruguay 
round of the General Agreement of Tariffs and Trade clearly illustrates 
the importance the United States attaches to international trade. 
United States-Japanese trade, however, has been plagued by a continuing 
Japanese trade surplus and a series of sectorial problems.
  The administration has been involved in intensive talks with Japan 
about creating a framework for improving trade on insurance, flat 
glass, and government procurement of telecommunications and medical 
equipment. With the threat of the United States applying trade 
sanctions, a negotiated solution was found at the September 30, 
deadline, thereby averting what could have led to a trade war. The 
trade agreements reached by the negotiators are being heralded as 
significant breakthrough.
  But have we made any real progress? After all this is hardly the 
first trade agreement concluded with Japan. More likely, we need to 
recognize this as just another lull in the already ongoing trade war--
which we continue to lose.
  A major obstacle which stalled negotiations for most of this year was 
achieving agreement on a means to measure United States gains in the 
Japanese market. The United States insisted that objective criteria are 
needed to measure trade progress. The Japanese, however, consistently 
objected, calling it managed trade. They prefer to open their markets 
by negotiating procedural problems and inequities on a sector by sector 
basis as they have so successfully done in the past.
  The September 30 agreement for Japanese Government purchases of 
medical and telecommunications equipment calls for these products to 
achieve, over the medium term, a significant increase in access and 
sales. But what does this mean? Is a significant increase a commitment 
or goal? Or is it just another negotiating ploy to once again postpone 
achieving any real balanced trade?
  Is the American position of setting goals or objective criteria a 
reasonable strategy to pursue? Our experience with the semiconductor 
agreement of 1991 tells us it works. The United States-Japanese trade 
pact in 1991 set a 20 percent semiconductor market share objective. The 
goal was achieved, and by the second quarter of this year, United 
States market share of Japans semiconductor market hit a record 21.9 
percent.
  Alternatively, supercomputer trade represents a more typical case of 
repeated attempts to open the Japanese market by addressing only 
procedural changes. While the overall market for high performance 
computing represents only a small portion of Japan's $60 billion annual 
trade surplus with the United States, the importance of supercomputer 
technology and its spin-offs, are critical in ensuring United States 
technological leadership and competitiveness. Congress and the 
President realized this several years ago when they created the high 
performance computing and communications program, a 5-year effort to 
invest more than $5 billion to further advance supercomputing 
initiatives in the United States.
  In the 1970's the Japanese Government recognized the strategic 
importance of supercomputers and a policy followed to delay foreign 
penetration into their market. Despite the overwhelming United States 
lead in high performance computing technology, Japanese government-
funded labs purchased only 2 of their 43 supercomputers from United 
States companies between 1980 and 1989. During this period, United 
States firms were rarely notified of government supercomputer 
procurements. Furthermore, when competition really got tough, Japanese 
companies would offer discounts of up to 90 percent. As a result, 
Japan's three major supercomputer firms, Fujitsu, Hitachi, and NEC 
directly benefited from these government policies.
  Since 1983, a number of United States Government initiatives were 
undertaken to help United States firms overcome Japanese trade 
barriers. An agreement concluded in 1987 addressed many of the 
procedural problems encountered by United States firms in the Japanese 
supercomputer market. By 1989, the United States recognized the 
agreement was not working. Although the Japanese supercomputer market 
was now formally open to United States firms, informal limits still 
applied, heavy discounts continued, and performance claims went 
unverified. Therefore, the U.S. Trade Representative [USTR] reopened 
negotiations, and a second supercomputer agreement was signed in June 
1990. That agreement required evaluation based on concrete performance 
criteria and limited the use of price discounts.
  Have these two agreements worked? Have United States firms, which 
enjoy 85 percent of the market in Europe, the only large neutral trade 
area, increased their 11-percent share of the Japanese public sector 
market? Is Japan complying with the formal requirements of the 
treaties? At best, the record is mixed.
  This past fiscal year, the Japanese Government bought 15 
supercomputers in a process under special scrutiny by the USTR. 
Although United States supercomputer manufacturers were awarded six of 
these contracts, two major problems remain: First, too few United 
States supercomputers were purchased and second,lack of treaty 
compliance still prevails. Based on an 85-percent United States market 
share in Europe, it is reasonable to expect a similar share in Japan. 
Under this assumption, United States firms should have won 12 of the 15 
contracts in the past fiscal year. Furthermore, no Japanese company 
actually submitted a bid in the six contracts won by United States 
firms, thus raising the suspicion that these contracts were earmarked 
for United States winners.
  The recent USTR review highlighted continuing problems in areas of 
systems software evaluation, compliance with the agreement's provisions 
on pricing, benchmark performance testing, and lack of definitive 
measures for agreement compliance. Therefore, on April 30 of this year, 
USTR Mickey Kantor announced his decision to continue the special 
treaty review for an indefinite period. This means, in essence, that 
the United States Government will continue to monitor supercomputer 
trade and insist that the Japanese Government increase its purchases of 
United States supercomputers.
  With Japanese efforts to foster their domestic industry and the 
tendency of Japanese users to purchase from related companies, the 
United States has become involved in a supercomputer trade dispute that 
has gone on for years. We have worked with our Japanese trading 
partners to bring down impediments to free trade through protocol and 
procedural agreements. The process is slow, and thus far lacks any 
means of measuring compliance. Kantor has shown he can be a tough and 
determined negotiator, and yet he also seems willing to rely on patient 
waiting and watching when necessary. While we have seen modest gains in 
sales of supercomputers to the Japanese Government, there is still a 
long way to go to reach a reasonably level playing field, and an agreed 
objective criteria.
  The supercomputer dispute merits our careful attention. If the 
Japanese Government refuses to give way on this high technology market, 
where we have already negotiated two detailed trade agreements, what 
hope is there for progress in areas where no such agreements exist. All 
indications are that the Japanese Government can be expected to 
continue using every means possible to protect their home market, while 
advocating free trade everywhere else.

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