LITTLE HOPES OF AGREEMENT IN JAPAN-US CONSULTATIONS

6:12 AM Jun 12, 1995

LITTLE HOPES OF AGREEMENT IN JAPAN-US CONSULTATIONS
Geneva 12 June (Chakravarthi Raghavan) -- Japan and the United States began Monday a round of bilateral consultations at the World Trade Organization over the US trade sanctions on Japanese luxury auto-imports, but neither side seems to expect any early agreement to end the bitter dispute.

The consultations are in terms of the Japanese request under Art. XXII of the GATT 1994 and the WTO's Dispute Settlement Understanding (DSU) -- over Japan's complaint that the announced trade sanctions, and the Customs actions already initiated pending a final determination, is violative of the US obligations and is already damaging Japan's trade.

While the United States wants the "consultations" to range over the whole field of its grievances over the state of the Japanese market, and its closed nature, Japan has made clear that these consultations under the WTO relate to and have to be confined to the issue of the unilateral US trade sanctions under the US trade law S.301.

Though the US had advised in mid-May the WTO's Director-General, Renato Ruggiero, that it would be bringing up a complaint against Japan and the closed nature of its auto-market for cars and car-parts nullifying and impairing US expectations in exchanging tariff concessions, it has not so far done so. The US is however expected to put in a complaint in some days. The US delegation to the "consultations" at the WTO headquarters is a three-member team, of relatively junior level officials: Ms Catherine Field, the USTR's Asst. Counsel-General in Washington, Mr. Andrew Stoler, Deputy chief of the US mission to WTO in Geneva and Mr. Andrew Shoyer, an attache (legal affairs) at the US mission.

But the Japanese have a large delegation, and the team is led by Mr. Kazuo Asakai, Deputy Director-General of the Economic Affairs Bureau of the Japanese foreign ministry and includes Mr. Tadakutzu Sano another senior official of Japan's Ministry of International Trade and Industry (MITI).

The US team made no statement to the battery of media representatives and cameras but indicated it would have a statement at the end of the talks. The Japanese officials said they would insist on limiting the talks to the US S.301 actions.

The US announced on 18 May its trade sanctions -- 100% tariff on imports of 13 varieties of luxury car imports from Japan, involving a trade of over six billion dollars. This penal duty is to be confirmed on 28 June, but to take effect retrospectively from 20 May.

The European Union and Australia addressed separately letters to the US wishing to join the talks, with the EU indicating its substantial trade interest in the systemic issues involved. Australia claimed a trade interest in terms of the car seat parts that it supplies to the Japanese luxury car markets.

The US agreed to the Australian request and Australia has joined the consultations. Though the US Mission on Friday put out a press release that the EU has been "invited" to join the consultations, this appeared to be somewhat misleading. The EU was 'invited' by the US to reword its request -- from an interest in the systemic issue to one based on "trade interest". but the EU did not agree to such a modification. Thereupon, the US did not agree to the EU request for participation in the talks.

Ahead of the WTO talks, US officials in Washington, including the US Trade Representative Mickey Kantor, took a tough line and said the announced 100% duty would take effect on 28 June if Japan does not agree to measures to boost its imports of Japanese auto-parts and luxury cars.

With a "we would not blink" statement, in a TV interview Saturday, Kantor said the sanctions would be imposed at end of the month if there were no accords Tokyo and there would be no ifs and buts.

US officials, and their supporters (few within the WTO), seem to think that as in the past it would be Japan that would "blink" and give in at the last moment, as they did over semi-conductors.

But the Japanese say that while the sanctions hurt them in trade, they would not give in. The entire WTO and the DSU was negotiated to prevent such unilateralism, and unless this is resolved "we would always be subject to such pressures... (and) others too...," Japanese sources say.

Japan has made clear that at the WTO consultations it would only discuss the trade sanctions imposed by the US in violation of its WTO obligations, and not questions about the auto-trade.

The talks are scheduled for 12-13 May here, with two meetings set for 12 May and a possible one on 13 May. The US has suggested a further round in Washington on June 20 -- after the Halifax G-7 Summit where President Clinton is due to meet Japanese Prime Minister Tomiichi Murayama.

The US Secretary of State, Warren Christopher is also due to meet with his Japanese counterpart, but with Washington saying there will be no negotiations, but that Christopher would be emphasizing the need to avoid a trade war that could damage overall relations -- the line that US diplomats and many of the US lobbyists have been promoting ever since Kantor announced his sanctions move, but was greeted with a worldwide chorus of outrage at the unilateral action damaging the WTO.

Japan has said that whether or not a second round of consultations in terms of the WTO agreement would take place would depend on the outcome of the first round in Geneva. Japanese sources were not sure whether the talks will stretch into a third session on Tuesday.

Privately, Japanese sources say that the US is clearly trying to stretch out the "consultations" and apply maximum pressures on the Japanese government and its car industry, before the issue goes before the WTO's dispute settlement mechanism which, beginning with the establishment of a panel could take a year to be concluded.

US media reports confirm this. The Wall Street Journal reported that US officials would be stonewalling at the consultations, arguing (in response to the Japanese complaint of the illegality) that no sanctions have yet been put finally confirmed or determined.

The United States has said it too would bring a complaint before the WTO over the state of the Japan's auto-industry market, and presumably this will be brought up - beginning with a request for consultations with Japan - before the Japanese complaint gets referred to a panel.

While both disputes could end up before the same panel for consideration, the final outcome in the two cases could follow a somewhat diverse path (over its adoption and implementation) depending on the provision of the WTO/GATT 1994 under which the US raises its dispute about the state of the Japanese domestic market.

If it is in terms of a Japanese violation of a GATT 1994 obligation, or any Japanese measure which, though not a violation of any obligation is still resulting in any benefit to the US being nullified or impaired, the two disputes will go through the same course.

But if the US complaint is in terms of the "existence of any other situation" -- the untested area of nullification or impairment of rights envisaged in Art XXIII:1 (c) -- Art 26:2 of the DSU will come into play, and there is no automaticity of adoption of a panel ruling or recommendation.

And if the panel hears complaints relating to a violation of GATT obligation or measure by a WTO member which may not violate but still nullifies or impairs rights of other parties and a complaint under "existence of any other situation", the panel's report and ruling on the latter will be separated from the other rulings before circulation to the membership.