U.S. Negotiators Complain of Japanese Attitude : Trade: Americans call for a commitment to remove barriers to commerce.

TOKYO —  Complaining that Japanese bureaucrats stubbornly insist on “defending the status quo,” U.S. officials on Thursday called upon Prime Minister Toshiki Kaifu to make a political commitment to remove structural barriers to trade.

“Too often today, instead of hearing new ideas, we heard simply a defense of the status quo,” a member of a delegation from Washington told reporters after a third round of talks began here on the so-called Structural Impediments Initiative. The talks had been postponed for a month because of last Sunday’s election in Japan.

“Now that the election is behind us,” the U.S. official said, “we need to hear from the political leadership of Japan.”

He and two other members of the delegation met with reporters after more than 10 hours of talks on the first of two days of negotiations.

Meanwhile, the economic newspaper Nihon Keizai quoted an official of the Japanese Finance Ministry as saying acceptance of a U.S. demand that Japan increase spending on public works would “deprive the Japanese government of sovereignty to control the domestic economy through fiscal policy.”

The newspaper quoted him as saying further that the U.S. proposals were “inconsistent.”

Japanese officials described Thursday’s talks as “heated,” but one of the American officials characterized them as focusing on a “mutual search for solutions--not pure confrontation.”

“It’s important to note that some progress has been made, but frankly much more needs to be done,” the American added. “We have a tight time schedule.” He said an interim report, which had been planned for March, is now expected in early April. He also said “at least one more meeting” will be needed before the report can be completed. A final report is to be issued in July.

The Americans, he said, presented “detailed ideas on how to remove structural impediments (to trade) in Japan, and we expect to receive a reply soon.”

One of the other Americans said they reminded the Japanese that the purpose of the talks is “not to engage in a debate but to identify and solve problems.”

The Bush Administration has made these talks the centerpiece of its economic policy toward Japan, and the outcome is expected to have a critical impact on Congress.

In the course of a visit to Tokyo earlier this month, Ryohei Murata, Japan’s ambassador to Washington, said the next six months will be a critical period for U.S.-Japan economic relations. He urged Prime Minister Kaifu to produce an interim report “to demonstrate Japan’s will to make progress on trade issues.”

“If our relations are not handled smoothly,” Murata told the newspaper Asahi, “a frigidity will emerge, and there is a danger that relations will fall into an extraordinarily unfavorable condition.”

None of the U.S. officials here for the talks would disclose the categories in which they charged that Japanese were defending the status quo.

But they cited as examples of progress plans to bolster the staff of Japan’s Fair Trade Commission and to improve the distribution system, and a new land law specifying that public use of land should be given priority over private ownership.

Even on those points, one of the U.S. officials said, the Japanese “have not done enough creative thinking, nor have they presented enough bold suggestions.”

Japanese officials said the United States urged Japan to increase, within three to five years, its spending on public works for sewers, roads, airports and harbors to 10% of the gross national product from the current 6.7%. Raising investment and lowering savings at home theoretically would increase demand, including demands for imports.

The proposal was rejected out of hand.

Public works spending here, Japanese officials said, is already at a level comparable to that in the United States and Europe. Any increase at a time of high growth in the domestic economy, they said, would ignite inflation.

Japanese officials said the U.S. delegation demanded that Japan abolish a law limiting the establishment of large-scale retail stores and amend its anti-monopoly law to curb collusive business practices.

Japan had rejected both proposals earlier but did offer to relax the rules on large retail stores and to strengthen enforcement of the anti-monopoly law.

The rules for establishment of large retail stores will be revised, beginning April 1, to reduce a 10-year waiting period to two years, the Japanese said they told the U.S. delegation.

The two sides were expected to spend today discussing Japanese proposals for reforms of structural barriers to trade in the United States.