8:00 AM Jun 26, 1995

JAPAN-US TRADE MINISTERS MEET IN GENEVA

Geneva 26 Jun (Chakravarthi Raghavan) -- Japan's Trade Minister. Ryutaro Hashimoto and the United States Trade Representative, Micky Kantor were due to hold talks here Monday night in efforts to ward off a trade war that could be triggered by the US-imposed unilateral trade sanctions against Japan, seen by everyone except the US as WTO illegal, formally going into effect midnight (Washington time) of 28 June.

The statements being made on either side, by leaders back home and their officials at Geneva, in formal and informal press briefings, have left a confusing trail whether the Minister-level meeting is an occasion to resolve some differences and settle a deal worked out by their deputies and private companies in the auto sector, or aimed at their domestic audiences to blame the other side if the dispute becomes a trade war with unpredictable consequences.

Both sides were talking about the wide gap separating them, and each was insisting on its own publicly announced tough-stance. The US was insisting that to avoid US unilateral trade sanctions going into effect Japanese government must give way and reach agreements, where progress in implementation could be monitored and measured, on all three questions separating them: autodealership, autoparts purchases by Japanese manufacturers (in Japan and their transplants elsewhere) and in the after-sales market (for servicing and repairs).

The Japanese side for its part insisted that it could accept not "numerical targets" of implementation, that the medium-term purchasing plans and behaviour of Japanese auto-companies -- who were described in media reports from Tokyo as having reached some understanding with US auto-part suppliers -- was one between private agents, and the Japanese government would not under-write or commit itself to.

Kantor was already in town Monday morning and conferring with his deputies and other officials, and is also due to confer with a US Congressional delegation (from the House Ways and Means Committee and the Senate Finance Committee) as well as representatives from the US auto-industry in town.

Hashimoto was due to arrive Monday evening at 1800 hours and the first meeting with Kantor is set for Monday night.

On Saturday, the vice-Ministers of Japan and the United States who have been holding talks since 20 June, announced the Hashimoto-Kantor meetings to take place from Monday evening.

The two sides, their trade vice-Ministers and their transport and trade officials, continued their meetings on Saturday and Sunday, but with both publicly saying that the gap is still too wide, and that the chances of an agreement are at best fifty-fifty.

Japanese spokesman on Saturday would not even commit himself by agreeing with a questioner that the very fact of the two Ministers meeting here is a sign of progress (since normally Ministers won't come to announce failures), but saying that it was neither a sign of progress nor of failure, but that the decision to meet was "consistent with the agreement of President Clinton and Prime Minister Murayama in Halifax to make the maximum effort to reach a negotiated agreement to the dispute."

On Friday, the two sides ended, without any agreement, their second round of Art XX (GATT 1994) WTO consultations -- on the Japanese complaint against the US unilateral trade sanctions and its violation of the GATT 1994 and the WTO provisions on dispute settlement.

Ending two days of consultations with the United States, a spokesman for the Japanese delegation told the media "that differences in views still remain wide and unbridged", and that unless there was a change in the US position, "Japan will be put in a position of having to seek a panel."

If the dispute goes to a panel stage, it will be the first time that the world body would be able to judge, and provide a ruling that would be automatically binding, over the US S. 301 family of laws, and the US government and Congress repeatedly holding it out as a threat to open other countries' markets.

Japan invoked the WTO procedures in mid-May immediately after the US announced its S.301 actions, with a 100% duty on Japanese luxury car imports to formally go into effect on 28 June, but with Customs withholding final clearance as of 20 May itself.

The US and Japan have now held two rounds of Art. XXII (GATT 1994) consultations -- the first on June 12, and the second time on June 22 and June 23, but without any solution.

The US stonewalling the charges that it has violated WTO, by repeating constantly that it has not violated the rules and blandly insisting that the trade actions were not in force. In a statement issued after the talks yesterday, the US repeated this position, stating that "the United States is in full compliance with its (WTO) obligations."

Japan has concluded that the consultations have not produced results, and is ready to go onto the next stage. As the Japanese spokesman said "we do not have at this stage any plan to request another round of consultations."

While the dispute could go to a panel quickly, if both sides agree that their consultations have failed, Japan could ask on its own for a panel on ground of failure of consultations only on expiry of 60 days from the time it began the WTO process - i.e. 17 July. There would be atleast another month before a panel is set up (two meetings of the Dispute Settlement Body), if the US is determined at every stage to slow things down.

The United States is bent on applying the maximum pressure and is in no hurry to ease the path for Japan to go to the panel stage, or for the WTO to rule against the United States.

The United States side is explaining its tough stance, and use of S.301 laws, not merely in terms of its arguments about Japanese markets and need to open them up, but as one to open up "their closed markets" in Asia and Latin America.

Besides the team of officials and experts on both sides in Geneva, for the WTO consultations and the parallel auto-trade talks within the parameters of the US-Japan framework talks, there are the inevitable US lobbyists from their auto-industry, and the Congressional team, whose members individually and otherwise are busy stressing how the Congress and public are behind the administration's flexing of muscles for opening up markets of other countries to US exports and need for Japan to reach a 'meaningful' agreement.

A press conference by two House members, Amo Houghton (Republican) and Sander Levin (Democrat) was perhaps revealing in that their remarks showed the deeply-held US view that it has some "god-given right" to force others to buy the products and services of US enterprises, and use all its powers and sanctions to achieve this. Some of their remarks, and views about S.301, for example, are more reminiscent of a byegone era -- the US naval expedition led by Commodore Perry in the 18th century to force Japan to open up for foreign commerce which resulted in US-Japan trade treaty, and similar Japanese treaties with Europe.

The two congressmen said that it was essential that the negotiations produced "significant, measurable results" in each of the three areas of the auto-talks: increased Japanese purchase of original parts, replacement parts, as well as an increase in the number of car dealers in Japan selling US automobiles. "Breathroughs have to occur in all three areas," they said.

Houghton and Levin spoke of 75% of the US public backing the administration on this issue. Levin stressed need for Japan sitting down and reaching an accord as important for the WTO since failure would be "harmful to the WTO position in the United States."

Levin then said (about the S.301 threat): ".. what is true in business within a country is true of business among companies between countries. You have to stand up for yourself. You have to pressure the other side. Nobody gives you anything in a free-enterprise system. No? I don't think so.... "

Levin also made clear that the US side was looking beyond Japan in its S.301 threats and efforts to open up markets: "...One reason we feel so deeply about the discussions with Japan in the automotive sector is that if Japan can continue its exclusionary policies, it is going to be a signal to every other country they can do the same. To China, the Malaysia, to Brazil or whatever..."

According to second-hand reports among media reporters gathered here (after a private US official briefing to US newsmen from Washington), US officials reportedly explained that they were taking this tough stance against Japan because they were afraid that other Asian countries were following the Japanese regulatory approach and this would make it difficult for US enterprises to export in future.

Reports from out of Tokyo said that in some complicated talks there involving the US embassy, US auto-parts suppliers and the Japanese automobile manufacturing companies, these last have outlined in general terms their medium-term purchasing plans (in terms of that ubiquitous expression 'globalization' of production and markets, and the strong yen appreciation etc), but that they had not been willing to set out in detail on paper their actual plans and targets (which the US side could then use to measure implementation, and come back with sanctions threats over failures).

Japanese officials were also quoted as turning down demands for such medium-term purchasing plans being put in writing and/or underwritten by governments, arguing that this would be an unwarranted interference by government in the market place.

US officials and their lobbyists, in briefings here and elsewhere, have also been pointing to the fact that the EU -- in terms of the auto-sector policy -- have extracted from Japanese companies commitments over local purchases and content and that the US is doing no more than emulating this and insisting on similar contents.

Reminiscent of a Eisenhower era statement in the US (What is good for General Motors is good for the United States), the US auto-industry's briefing packets have a slogan 'What Americans drive, drives America'.

The insistence on Japanese autodealers providing detailed plans of their future parts purchasing, would run though counter to the WTO's Safeguards agreement requiring the phase-out of 'grey area' measures (which is what the Japanese automanufacturers voluntary purchase plans with US autoparts firms and involvement, tacit or otherwise, of US and Japanese government) would mean.

It would also involve a violation of Art I of the TRIMs agreement which obliges Members, prospectively, not to have any agreements about local content and purchasing requirements, notify within (90 days of WTO entry into force) all Trade-related Investment Measures prohibited by the agreement (local content requirements etc) now in force and remove them, in the case of developed countries, before 1 January 1998.