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Yet almost as soon as the agreement was signed, the U.S. began charging that it was being violated. The main culprits, in Washington's view, were Japanese manufacturers who continued to dump semiconductors, either directly or through middlemen, in such Asian markets as Hong Kong, Taiwan and Singapore. Washington was as sure of that activity "as I'm sitting here," declares Commerce Secretary Malcolm Baldrige. In January the Reagan Administration privately warned Japan that some kind of retaliation was likely unless the practice stopped. Washington finally conducted an investigation and satisfied itself that dumping had taken place. The Administration's preliminary finding is that there has also been no increase in Japanese purchases of foreign microchips.
Finally, the day before President Reagan announced the sanctions, the decision was endorsed by the White House's twelve-member Economic Policy Council, a Cabinet-level body chaired either by the President or, in his absence, by Treasury Secretary James Baker. With Baker in charge, the council fretted considerably over its decision. According to one Administration insider, there were sharply differing views about the value of the semiconductor agreement in the first place. Nonetheless, the group reluctantly agreed to go ahead with retaliation.
Much about the semiconductor pact is indeed questionable in economic terms. Among other things, it raises the costs of American manufacturers who use the devices to build computers and other products, thus making them more vulnerable to foreign competition. But to U.S. trade officials, the evidence of alleged Japanese dumping and Japan's refusal to open domestic semiconductor markets were the last straw. For one thing, the ink on the semiconductor agreement was barely dry before, in Washington's view, it was being ignored. For another, that Japanese behavior seemed to U.S. officials to be part of a familiar Japanese attitude toward trade issues: delay followed by nominal agreement followed by intransigence.
The American list of similar complaints on that score is long. In the past ten years, Washington has pressed mightily to open Japanese markets to such exports as beef, oranges and even U.S.-made baseball bats for a baseball-mad country. In almost all those situations, the U.S. has eventually succeeded, at least to some extent. Last October, for example, Japan agreed to open its cigarette market to U.S. manufacturers by suspending its 20% tariff on that product. American cigarette manufacturers estimate that their market in Japan will quintuple, to an estimated $1 billion annually. But in every such case, contends an Administration official, "we have had to land the full power and majesty of the Government on the Japanese. Every single thing is a fight that gets up almost to the Cabinet level."