Clinton Warns Japan On Steel

President Clinton Monday praised the "very strong steps" taken by Prime Minister Keizo Obuchi to revive Japan's economy and ease a severe global financial crisis. But in a clear sign of rising trade tensions between the world's two largest economies, Mr. Clinton also warned that a flood of Japanese steel into the United States must be halted.

The two nations did agree on a package of trade deals the administration hopes will mean expanded sales for U.S. companies. But Mr. Clinton repeated a threat he first made in January that his administration will initiate cases to impose penalty tariffs on Japanese steel shipments to protect the U.S. industry.

"We will take action if steel imports do not return to their pre-crisis levels on a consistent basis," he said.

Obuchi, making the first official visit to the United States by a Japanese prime minister in 12 years, said his government is tackling the root cause of rising steel imports into the United States -- a financial crisis that has pushed one-third of the world, including Japan, into recession.

"I explained to the president that Japan is swiftly and boldly taking every measure in order to address the difficulties we are facing," Obuchi said at a news conference with Mr. Clinton. He predicted that those efforts will result in a "major turnaround" that will pull Japan out of its worst recession in 50 years.

The two leaders hailed the new package of trade deals designed to reduce Japanese barriers to American exports and address a U.S. trade deficit with Japan that hit $64 billion last year, the second-highest level on record.

The Japanese pledged to eliminate regulatory red tape and other barriers that U.S. companies have long complained about. The series of actions include reducing hookup charges for foreign telephone companies seeking to crack Japan's vast telecommunications market, revising regulations that have prohibited sale of American lumber for building purpose and shortening the approval time for new drugs offered by U.S. pharmaceutical companies.

The deregulation measures represented a follow-up to an initial package of measures announced by the two countries at last year's Group of Seven economic summit in Birmingham, England.

While U.S. trade negotiators had complained that Japan was backsliding on the commitments made a year ago, the administration chose to emphasize the positive with the new trade agreements.

In addition to measures benefiting specific industries, the administration struck deals it said would expand opportunities for American businesses to make foreign investments in Japan and would strengthen Japan's antitrust enforcement.

"These are potentially very significant steps which underscore a sea change in attitude" by the Japanese, Undersecretary of State Stuart Eizenstat told reporters.

Deputy U.S. Trade Representative Richard Fisher said that despite the troubles th United States has had in getting concrete results from last year's deregulation package, he was encouraged by signals Obuchi is sending that his government realizes Japan must change in order to end more than seven years of economic stagnation.

In a guest column in The New York Times last week, the prime minister wrote: "We realize that unless we adopt a more flexible economy driven by the market, Japan is doomed to economic and technological decline."

Fisher said he viewed those comments as a strong signal that Obuchi, unlike a string of short-serving prime ministers before him, was serious about making change.

Fisher said the proof will come in Japan's efforts to implement Monday's deregulation efforts and in the government's commitment to addressing the other trade irritants.

He listed those as ensuring that the drop in steel shipments of recent months continues and that greater efforts are made to address U.S. complaints about implementation of other trade deals designed to boost sales of American companies in the Japanese market in the areas of flat glass, automobiles and insurance.

On foreign policy issues, Obuchi praised the U.S. efforts to deal with the Kosovo crisis. He pledged $200 million in financial aid to help affected nations in the region.

Both leaders expressed the desire to continue joint efforts to deal with nuclear and missile threats posed by North Korea.

Mr. Clinton said close cooperation between the United States and Japan does not represent a threat to China. He said the three nations "together could do great things in the Asia-Pacific region" in coming years.

By MARTIN CRUTSINGER