8:53 AM Jun 23, 1995

US AND JAPAN CONTINUING TO TALK

Geneva 22 June (Chakravarthi Raghavan) -- Both Japan and United States reported Thursday stalemate in their autotrade talks, accusing each other of standing pat on their positions, but were continuing the talks claiming they were putting in "maximum efforts" to resolve their dispute as called for by their heads of government after their Halifax meeting.

Whether the continuing discussions, were merely enabling each side to better understand the other's views (as was also claimed by both sides) or a process of 'softening up' by both to reach accords behind the talking-tough in public smokescreen to mislead domestic opinion on either side was not easy to fathom.

President Clinton weighed into the dispute again with a tough speech to the Ford Motor company workers in New Jersey, even as the US commerce and trade officials were talking in Geneva to find a solution. The Wall Street Journal, which editorially has been very critical of the US trade sanctions on Japanese cars, recently described it as an attempt by Clinton and Kantor to get UAW membership, the Reagan trade unionists as it described these blue-collar workers who had deserted Democrats in the 1980s to support Republicans.

The US continued to call for agreements at the level of the Japanese government, and in a way that progress in implementation could be measured.

The Japanese side continued to insist that any agreement could only cover areas legitimately within governmental arena and that areas that were within the ken of its private trade and industry could not. Any plans by the Japanese car manufacturers about sourcing their supplies was for them to decide and the government could not be a party.

This reiteration of views came even as in Tokyo the US Ambassador and officials were portrayed as discussing these issues with the major Japanese auto manufacturers who, while reportedly willing to 'source' their supplies taking account of the 'globalisation' processes at work and the high value of the dollar, were also portrayed as unwilling to set targets. Japanese media reports suggested that in fact the Tokyo talks were addressing the principal problems between the two countries, that some progress had been made, but that the agreement would not be announced there.

But despite the impression of inflexible positions and stands, trade diplomats continue to think that the US and Japan would reach a compromise, involving Japanese actions without seemingly being governmental actions or commitments.

They note in this connection that in 1987-88, in a dispute between the US and Japan over import restrictions on some agricultural products, where Japan sought to justify them among others on grounds of their being in connection with government measures for domestic supply management, one of the issues involved the actuality of government 'regulations' in this behalf.

In that dispute, the Japanese government took the position that 'administrative guidance' was as good as government regulations. The panel accepted this making clear that it was an approach without creating a precedent, and based on the special characteristics of Japanese society. The panel said that in Japanese society such administrative guidance was a traditional tool of government policy based on consensus and peer pressure and that it would therefore base its judgements on the effectiveness of the measures in spite of initial lack of transparency.

In subsequent discussions (under the trade policy review of Japan), GATT members all seized upon this to argue about the restricted nature of the Japanese market and its being not merely one of behaviour of private parties, but of governmental guidance.

Perhaps at some point, at the deadline of 28 June midnight Washington time when the 100% tariffs on Japanese luxury cars formally have to be confirmed, an understanding and consensus would be reached involving the Japanese government advice to its private sector, but not a Japanese government 'measure' or 'agreement', which the US could say meets its objectives, but whose implementation it would monitor.

Perhaps, the Japanese could also still pursue their case at the WTO against US unilateralism, even after the US sanctions don't go into effect for lack of confirmation of the provisional measures announced in the Federal Register.

Their case that the announcement that the tariffs could take effect retrospectively from 20 May, and the US customs actions in withholding final clearance, was a violation of the WTO and GATT-1994 and Japan's trade has suffered damage could be well-founded.

Even this limited issue of the customs withholding of final clearance, flowing as it does from the various US determinations under S.301, involves the whole gamut of US unilateral threats and questions of WTO being rule-based or power-based.

But, whether any GATT panel, and appellate body, would want to catch the nettle and rule about the WTO legality of US S.301 actions, is not so certain. The WTO and GATT, and its panels, despite all claims, are essentially political bodies.

According to the USIA report (the State Department's US Information Agency that distributes its information abroad), President Clinton in a speech to the United Auto workers at New Jersey plant of the Ford motor company, accused Japan of "rigging" its auto-markets to gain a 100-to-1 advantage over American products, that it was not technology that kept Fords and Chevrolets off Tokyo's streets, and that Japan was seeling its luxury cars in US for $9000 less than in Osaka.

There were 'consultations' talks at the WTO on the US trade sanctions of 100 % tariffs on Japanese luxury car imports, already provisionally in effect but to be finalised on 28 June.

Parallel to this there were talks at the level of vice-Ministers at the Japanese Mission here, and at night in a hotel where the Japanese vice-Minister was staying, within the parameters of the US-Japan framework agreement covering the areas of auto-dealers and showrooms in Japan, auto and autoparts trade, the aftermarket servicing and regulations.

While these were supposedly addressing the substantive political issues involved, the US and Japanese also held talks at socalled technical level, with the Japanese Director of the automobile section in the MITI reporting that he had seen no change in the US position of seeking agreements based on numerical targets.

The US Under-secretary for Commerce, Jeff Garten, told another news conference at the US mission later that the US position was being mis-represented, that it was no longer demanding (as in their earlier round of talks) about fixed percentages of dealerships, purchase of US autoparts (a 20% figure had been mentioned) by Japanese automanufacturers, both in their plants in Japan and their overseas 'transplants', as well as over the aftermarket servicing issues.

"We are not after numerical targets," Garten said. "What we are trying to do is devise a system which allows us to track progress, once the agreement is in place... If we had an agreement which pointed to an increase in dealerships for foreign companies, we would like to be able to count the number of dealerships over a period of time, to see whether the agreement was working. We would also like to make some qualitiative judgments about whether those dealers are in good locations."

MITI official, Atsushi Oi, had earlier said that on all the three areas of disputes, both sides had confirmed their respective positions, it was his "frank impression" that both sides were "wide apart" and that the basic US position about numerical targets remained unchanged. The people taking part in these discussions here (on the US side) were different from those who took part in the earlier round of US-Japan talks (at Vancouver and Whistler), and the expressions used were not exactly the same, "but my personal impression" is that the US side has not changed its approach of numerical targets. And so long as that approach does not change, no agreement was possible.