Renewal of U.S. paper pact ‘out of the question,’ exec says

The United States is expected to demand this month that Japan introduce a new set of measures to expand foreign paper makers’ sales, but a senior Japanese industry official has said such a bilateral arrangement is “out of the question.”

“The Japanese market is already open to foreign competitors and thus it is totally unnecessary for Japan and the U.S. to have another agreement,” said Takashi Hirokawa, vice president of the Japan Paper Association, in a recent interview. “We believe the current agreement should not have existed in the first place and it is utterly out of the question to have another one,” he said.

The 1992 bilateral agreement on paper and paperboard products, which expires April 4, calls on both the Japanese and U.S. governments to take measures to “substantially increase market access” in Japan for foreign paper producers. The Japanese government has already conveyed its position to Washington, stating that it has no intention of renewing the agreement now that the pact’s intended goals have been achieved. The U.S. government, however, thinks otherwise. Although a formal request has yet to be made, U.S. trade officials have said they will put forward certain proposals in due time on “new or modified measures” to further encourage increases in imports.

While acknowledging that certain improvement has been derived from the existing agreement, the U.S. contends that “fundamental market access problems” remain. For instance, Washington claims that access to end users remains inhibited by the power of Japan’s major producers and their influence over distribution channels through such means as substantive equity holdings. Hirokawa says such an argument is groundless. “Japanese paper manufacturers do hold some equities and send executives to some distributors, but they do not control distribution channels,” he said. “One distributor handles products from a number of different suppliers, whether they are foreign or Japanese.”

He also pointed out that the U.S. is the sole country to have failed to increase paper exports to Japan, in stark contrast with the remarkable success other foreign suppliers have achieved. According to the Ministry of International Trade and Industry, Japan’s imports of printing paper and paperboard products nearly doubled from 456,000 metric tons in 1992 to 867,000 metric tons in 1996, with the overall foreign share rising from 2.2 percent 3.7 percent.

During that period, imports from the U.S. declined from 225,000 metric tons to 222,000 metric tons, its share falling from 1.1 percent to 1 percent. What is apparent from the statistics, Hirokawa said, is that Japan is accessible for those firms that make efforts to meet the needs of customers. “European and Southeast Asian companies have done just that, and this is why they have been able to boost their sales in Japan,” he said. “At the same time, I cannot help but wonder whether American firms really made the necessary effort.”