November 4, 1987

In response to improved Japanese compliance with the 1986 U.S.-Japan semiconductor agreement, I am today announcing my intention to suspend a portion of the sanctions I placed on Japanese products last April, when we determined that Japan was not fully implementing the agreement.

I imposed these sanctions to demonstrate that we are serious about fair trade and to make clear that we insist on the full implementation of all our agreements. I also made clear, however, that we would remove the sanctions as soon as we had firm and continuing evidence that the dumping of Japanese semiconductors in third-country markets had stopped and that access to the Japanese market had improved. Japan is an important trading partner and a close ally, and we want to make every effort to resolve our differences as soon as possible.

This case serves as a reminder that the judicious and proper use of section 301 can bring results. Retaliation ought to be used only as a last resort and only when it is likely to lead to a positive result. In this case, we used the threat of retaliation to achieve a sound agreement on fair trade in semiconductors. When that agreement was not complied with, retaliation was used to bring about compliance. I hope Congress will remember that section 301 has been used effectively before making any changes in the law that would attempt to force the President to retaliate at times when it would be counterproductive.

Last June, when a review of the data showed that Japanese third-country dumping was declining on one semiconductor product, I ordered a proportional response and lifted sanctions on $51 million of the full $300 million in sanctions. Because the most recent review of the data shows that third-country dumping has ceased for both DRAM's and EPROM's -- the two semiconductor products covered under this portion of the agreement -- I am directing an additional suspension of sanctions amounting to $84 million. The remaining $165 million in sanctions will remain in effect because of the lack of sufficient progress to date on access to the Japanese market for foreign-based semiconductor makers.

U.S. semiconductor producers and users were closely consulted during our discussions with the Japanese Government. Based on these discussions, they recommended the action I am taking today. The Japanese Government has given me assurances that this positive pattern with respect to third-country dumping will continue.

If these assurances prove not to be the case, I will not hesitate to reimpose the partial sanctions that have been suspended. I have also been assured by the Government of Japan that no quantitative or other kinds of restrictions exist on the production, supply, or shipment of semiconductors and that it is not engaged in allocation schemes that might disadvantage foreign purchasers of semiconductors from Japanese producers. In addition, the Japanese Government has reaffirmed its commitment to monitor company-by-company costs and export prices for certain semiconductors to prevent dumping.