U.S. to take trade dispute to WTO

May 11, 1995|By Knight-Ridder News Service

WASHINGTON -- The Clinton administration yesterday said it would pursue a risky strategy of trying to enlist other countries in its quest to pry open Japan's markets for autos and automotive parts.

U.S. Trade Representative Mickey Kantor said the administration would file a trade complaint against Japan with the World Trade Organization (WTO), while at the same time imposing separate U.S. tariffs on Japanese goods.

Japan has threatened to retaliate by filing its own WTO complaint, which would create the first major test of the authority of the recently overhauled world trading system.

The stakes are enormous: If the Clinton administration wins international support for its claim at the WTO, the decision would place heavy pressure on the Japanese to recognize American complaints and open their markets.

But if the U.S. arguments are rejected, the decision could undermine decades of trade policy based on the premise that Japan is a protectionist, unfair trading partner.

The aggressive actions could seriously escalate trade friction between the world's two largest economies, affecting the U.S. price of Japanese goods, thousands of American jobs and billions of dollars of business for U.S. companies.

But the Japanese also have a lot to lose in the coming standoff -- most importantly, free access to a vitally important market.

"We will insist on fair rules, on a level playing field," Mr. Kantor said. "We're going to resolve this matter one way or the other."

Despite its risks, the decision to seek WTO support for the U.S. case against Japan was viewed by many trade analysts as a shrewd move.

"This is a brilliant stroke of strategy, to turn the table on the Japanese," said Greg Mastel, a trade specialist for the Economic Strategy Institute.

Mr. Mastel said Japan had been trying to cast the United States as the one violating the spirit of global trade agreements for its threats to impose sanctions.

But by going to the WTO first, the U.S. side can shift the focus to the closed nature of Japan's economy, he said. "This keeps the focus on the fact that the Japanese are protectionists," Mr. Mastel said.

Robert Z. Lawrence, a Japanese trade specialist at Harvard University's John F. Kennedy School of Government, added that it was a good move to involve other nations in the task of opening Japan's markets.

"By bludgeoning Japan bilaterally, we've taken on a lot of the political burden ourselves," he said. "But these are global trading issues."

The administration could move to add big taxes as early as next month to the price of luxury cars and other imports from Japan. The tariffs would be proposed "in a few days," Mr. Kantor said. They could be imposed anytime after a 30-day comment period.

He said the WTO complaint would be filed in about 45 days.

The WTO, which was created this year to replace the General Agreement on Tariffs and Trade (GATT), is a powerful coalition of 125 nations that sets the terms of worldwide trade.

The new WTO has more power than the old GATT system to settle trade disputes. In the auto dispute, the Clinton administration has charged that certain Japanese government regulations are a direct and illegal barrier to the sale of foreign car parts.

William Duncan, the Washington director of the Japanese Automobile Manufacturers Association, called Mr. Kantor's tariff-WTO plan a "sentence-first, trial-later" violation of international trade laws.

Mr. Kantor made it clear the Japanese government could end this confrontation by agreeing to some of the proposals the U.S. side has made for 20 months: easing rules on Japanese car inspections that limit the use of foreign repair parts; promoting the sale of U.S. cars at Japanese dealerships and prodding Japanese automakers to resume plans to buy more U.S. parts.

Both actions are expected to give Clinton negotiating leverage when he meets Japanese Prime Minister Tomiichi Murayama at a June 15 summit of industrialized nations in Halifax, Nova Scotia.

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