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US Plans to Take Japan to WTO as Trade Controversy Continues

By Clay Chandler
The Washington Post

The Clinton administration is preparing to take a broad complaint against Japan to the World Trade Organization, alleging that excess regulation and collusion among big Japanese car markers discriminates against the sale of foreign-made autos and auto parts.

The administration is readying the charge as a counter to possible action by Japan, which has promised to haul the United States before the Geneva-based trade panel should Washington impose sanctions on Japanese imports in an effort to open the Japanese auto market.

Administration officials hope that, at a minimum, the prospect of a highly visible WTO inquiry into Japan's restrictive economic structures would make negotiators in Tokyo think twice about taking their complaints about U.S. sanctions to the WTO.

U.S. Trade Representative Mickey Kantor, who broke off negotiations with Japanese Trade Minister Ryutaro Hashimoto in Canada last week after five days of haggling, is expected to announce within the next two days which Japanese imports the administration will target for billions of dollars in punitive tariffs.

Japanese-made luxury cars, minivans and auto parts lead the list of products earmarked for sanctions, according to administration officials, who concede that - if considered in isolation - unilateral tariffs on those items would violate WTO rules.

Last year, Japan exported about 200,000 luxury cars, each costing $35,000 or more, out of total exports of 1.64 million vehicles, according to Japanese industry figures.

The administration's grievance against Japan would rely on a relatively obscure provision in WTO rules known as the "nullification and impairment" clause. It would argue that anti-competitive features of Japan's domestic market essentially have "nullified" the benefits of the tariff reductions Japan promised as the price of admission into the global trade body.

If WTO arbiters concur with the U.S. assessment - and many international trade experts predicted they might - it would be a considerable embarrassment for Japan. Such a decision would enable the United States to inflict harsh trade penalties on Japan without fear of international condemnation and could set a precedent for similar complaints against restrictive trade practices in other Japanese industries.

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Volume 115, Number 24.
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