U.S. BEEF, CITRUS TALKS WITH JAPAN SEEN TOUGH
The Reagan administration is expected to
face tough resistance from Japan and from some entrenched U.S.
interests, if it hopes to succeed in forcing Japan to end beef
and citrus import controls by April, 1988, U.S. and Japanese
officials said.
    Agriculture Secretary Richard Lyng and Trade Representative
Clayton Yeutter took a hardline stance on beef and citrus in
talks here last week, insisting that the quotas be abandoned by
April, 1988.
    But that stance will be difficult to maintain because Japan
will resist the pressure fiercely and because some U.S.
suppliers of those commodities have an interest in maintaining
the quotas, U.S. and Japanese officials told Reuters.
    Twice in the past, the United States has negotiated with
Japan on beef and citrus import quotas -- during the Tokyo
round of multilateral trade negotiations in 1978, and in
bilateral talks in 1984.
    Each time the U.S. demanded an end to the quotas at the
outset but ultimately accepted substantial increases instead.
The current agreement calls for an increase in high quality
beef imports to 58,400 tonnes in fiscal 1987, oranges to
126,000 tonnes and orange juice to 8,500 tonnes.
    Lyng has said repeatedly that this time the United States
will not settle for simple increases in the quotas. Japan has
been given plenty of time to reform its agricultural support
system and the quotas must be scrapped, Lyng said.
    Japanese officials want to begin informal talks on beef and
citrus in August or September in Hawaii, sources said.
    If the U.S. intends to press its tough stance, and Japan,
as expected rejects the demands, the issue may then be put to
the General Agreement on Tariffs and Trade for settlement,
which would mean prolonging the friction beyond the April, 1988
deadline set by the U.S., officials said.
    In interviews here, Japanese officials insist that on beef
they will not liberalize imports, regardless of the U.S.
pressure, because the Japanese beef industry is not competitive
and would be damaged by freer trade.
    Most Japanese beef production still tends to be on small
farms which Japanese officials said must be protected from
cheap imports by use of the quota system.
    Furthermore, while the U.S. National Cattlemen's
Association is strongly supporting the tough administration
position, some U.S. meat exporters and packers are ambivalent.
    This is because to some U.S. exporters and packers beef
exports to Japan under the quota system are a steady, reliable
business managed by a quasi-government Japan Livestock Industry
Promotion Corporation. Under quotas the U.S. share of Japan's
beef market has expanded at the expense of Australia.
    In the absence of quotas, some U.S. suppliers are concerned
the U.S. share might decline and exporting to Japan would
become a riskier business, meat industry sources said.
    Major U.S meat industry leaders will meet in Washington
next week, including cattlemen, processors and exporters, in an
effort to reach an industry-wide consensus toward Japan.
    The citrus industry also appears split on the quota issue.
California's Sunkist, the largest U.S. supplier of oranges to
Japan, has expressed reservations about eliminating quotas.
    A representative of Sunkist said the cooperative is
concerned that in the absence of quotas, lower quality oranges
from Israel and South Africa might be competitive in Japan.
    Ironically, some Japanese officials hinted that fresh
oranges may be a product on which imports could be freed with a
minimum of impact on Japanese mandarin orange production.
    This is because U.S. oranges do not directly compete with
smaller Japanese mandarins, officials said. But Japan wants to
maintain quotas on orange juice because it fears imported juice
tastes better and would displace Japanese mandarin orange
juice, they said.
    One scenario mentioned by both U.S. and Japanese officials
is that Tokyo may try to blunt the tough administration stance
by offering to scrap the quota on fresh oranges in return for
U.S. acceptance of increases in beef and juice quotas.
    Lyng has acknowledged that liberalization of beef and
citrus imports is a difficult objective, but he insisted during
the week-long tour here that it is a high priority on the
U.S./Japan agriculture agenda-- more important than the rice
issue which received most of the attention.
    Asked about the ambivalence of some in U.S. agribusiness,
Lyng noted some interests on both the U.S. and Japanese side
have benefited from quotas but this will not stop the
administration from pressing for liberalization.
    And Lyng said the administration believes it can marshall
more support for eliminating the quotas now than ever before,
because of concern about Japan's rising trade surplus.
    "We're coming at this one (beef and citrus negotiation)
with a much stronger view coming out of Washington. The times
have changed. The trade balance is much worse," Lyng said.
 Reuter
