Feb 23, 1989

EEC, JAPAN ADVISED TO SETTLE COPPER DISPUTE BILATERALLY.

GENEVA, FEBRUARY 21 (IFDA/CHAKRAVARTHI RAGHAVAN)ó The European Communities and Japan have been advised to settle through bilateral negotiations, in the context of the Uruguay round tariff negotiations, their differences over Japanís high tariffs on imports of copper cathodes and wire bar.

The advice, in a note circulated to the GATT Council Tuesday, has been given by the GATT Director-General, Arthur Dunkel.

His good offices had been sought by both parties to settle their dispute over EEC charges of cartelisation and the high prices paid by Japanese smelters for copper ores.

The dispute between the EEC and Japan on these matters goes back to the 1960ís. More recently, the EEC had brought up the issue as a dispute before the GATT council in 1982 and had renewed its complaint in 1987.

The EECís complaint has been that due to Japanese practices, EECís smelting and refining industry has been having serious difficulties in obtaining adequate supplies of copper concentrates and ores on "acceptable" terms.

In the EEC view these difficulties arose from "market distortions" created by Japanese smelters "often offering higher prices for concentrates than what EC smelters believe Ďnormal market conditionsí justify", thus enabling Japanese smelters to obtain inequitably large shares of concentrates.

By raising the complaint in such terms, the Communities would in effect appear to have been arguing on need for a cartel of importers and buyers of copper concentrates to ensure that the prices are kept down.

The EEC has said that the ability of Japanese smelters to offer such high prices for concentrates has been due to "questionable practices", including high Japanese tariffs on imports of refined copper, concealed import restrictions, possibly hidden subsidies, and a price cartel operated by Japanese producers.

Japan has insisted that its import duties are consistent with its GATT obligations, that there are no hidden restrictions on imports, that there is no producers' cartel, and that purchase terms for copper concentrates is a purely commercial matter completely outside the purview of GATT.

A report to Dunkel by Gardner Patterson (who provided on behalf of Dunkel good offices to settle the dispute) showed that Japan had violated no GATT obligations in this matter, nor was there any evidence presented about existence of a GATT producers' cartel.

While there were some governmental assistance (research funds, aid for stockpiling, etc.), these had been extended both by Japan and EEC and had had no significant impact on competitive position of industry in either Japan or EEC.

At the same time, in the past the EEC industry had been affected and hurt by the ability of Japanese smelters to pay higher prices for concentrates. But EEC producers had never been seriously short of concentrates.

However, Japan still has high tariffs on cathodes and wire bar imports, the usual form in which bulk refined copper is imported.

This tariff is legal in GATT, and despite tariff cuts in past rounds, and despite the fact that currently Japan is applying a rate below the bound rate, it is the highest among the major industrialised countries.

In most other industrialised countries bulk refined copper has a zero tariff.

In the light of the conclusions of Patterson, Dunkel has said that the two sides should engage in reciprocal and mutually advantageous negotiations in order to substantially reduce or eliminate Japanese tariffs on cathode and wire bar.

Dunkel has noted that substantive negotiations on tariffs in the Uruguay round are scheduled to begin no later than July 1, 1989, and any Japanese reduction of tariffs (under bilateral agreement with the EEC) would be part of the liberalisation effort to be undertaken in the Uruguay round and extended on a MFN basis to other participants.