2:14 PM May 22, 1995

US WILL ABIDE BY WTO RULING !

Geneva 22 May (Chakravarthi Raghavan) -- United States Commerce Secretary Ronald Brown told newsmen Monday that the United States would abide by any ruling of the World Trade Organization on the trade sanctions imposed on imports of Japanese luxury cars.

But with duties already biting, provisionally, from Saturday, and with a WTO ruling atleast a year away even if it is proceeded with urgently through all stages, Brown's assurance would do nothing to reassure US trading partners about any 'trade security' under the WTO against US unilateralism and threats in the area of trade which, he himself said, was "by definition contentious".

The US has announced a provisional 100% duty on all Japanese luxury car imports, and these have gone into effect on 20 January, though a final determination is atleast a month away. But the provisional duty, to be paid to the US customs before any cars that landed on US shores after 20 May could be cleared would mean that in effect the duties are already being levied, but could be refunded if a settlement is reached.

The US has imposed these sanctions under its domestic trade law S.301 on the ground of the Japanese automobile and auto-parts market not being open to competition from US suppliers.

Japan has taken the case to the WTO, and before filing a formal complaint, on 17 May has sought "urgent" WTO consultations with the United States. Brown, in town for opening of an 'American Center' in Geneva and addressing a news conference, conceded that the issue was "urgent" -- under WTO rules, the US would be obliged to agree to hold consultations with Japan within ten days and, if no settlement is reached within 20 days, Japan will be able to invoke the WTO for establishing a panel to hear its dispute.

But beyond these two statements -- that the US would abide by the WTO ruling and would agree with Japan that this is an urgent dispute -- Brown gave little ground and his statements and answers to questions, some of them slicker than those from a used car salesman, could leave little doubt that the United States would continue to use unilateral trade sanctions and threats of trade sanctions to prize open markets of other countries for US exports of goods and services and it would be for the aggrieved countries to take their case to the WTO and win it there if possible.

Though Brown said the US would abide by the WTO ruling, the Congressional testimony of US Trade Representative Michael Kantor, Brown and other administration spokesman, before the US Congressional approval of the Uruguay Round accords, had indicated that the US even then would have the option of not "implementing" such rulings and leaving it to the other party to retaliate.

Brown repeated the by now familiar arguments from the US side about the Japanese automobile and autoparts markets not being open to foreign suppliers, of the Japanese consumer paying more than he need to because of this state of the market and that what the US was doing to prize open the Japanese market would benefit everyone.

Brown, like other US spokesman, also hoped that the Japanese would come back to the negotiating table and negotiate a good agreement with the US so that no sanctions ultimately need go into effect.

"We have published a sanctions list, our desire is to get an agreement to reduce the non-tariff barriers which clearly exist in the Japanese market. It is clear what our trade law requires and at the end of the (30-day) notice period, we can impose these sanctions. I am hopeful there will be an adequate response from the Japanese...."

The US action, he said, should not have come as a surprise to anyone, though there may have been some surprise at the level of the sanctions. From the beginning the US had made clear that it would continue to use its domestic trade law.

"We have not yet imposed the sanctions," Brown somewhat disingenuously contended. "We have only published a preliminary list. We hope sanctions will not have to be imposed and we could have a good agreement. With one exception, progress has been made in opening up markets only by sanctions or threat of sanctions. The dispute is not about US economy and jobs but of market opening for the rest of the world. It will also be beneficial for the Japanese consumer..."

The administration's action, he said, had the support of Congress, industry and the public and also from other parts of the world.

Asked whether the US was not already in defiance of the WTO -- in starting the action and imposing sanctions, without first going to the WTO with its complaint, winning its case before the panel and getting authorization from the WTO -- Brown said it was up to the WTO to say that. By any objective criteria it was clear that the Japanese market was not open. If no one had the courage to challenge it, the US had to take the lead and do so. Brown, and the USTR Mickael Kantor will be in Paris from today for the annual OECD Ministerial meeting, and so will be Japanese Trade Minister Ryutaro Hashimoto.

Both sides say no meetings have been set, and Japan has also said it would not negotiate so long as the US does not withdraw its announced sanctions.

However, most observers believe that behind these public positions, the two sides will reach an understanding -- at level of their auto-industries, with governmental backing, for Japanese manufacturers to buy more US parts for the Japanese plants in Japan and abroad -- including in the United States and elsewhere. This will be a voluntary agreement for local (US) content and will be a managed trade.

Trade officials of other countries -- even those agreeing with the view that the Japanese market is a closed market, closed by the restrictive practices of its corporations -- are both alarmed at the prospect of the US-Japanese fight and its effects on the WTO, and perhaps even more concerned that the dispute may never come up for a resolution, "once and for all about the US S.301 instrument", as one trade official put it. A US-Japanese accord, with Japan giving way, would encourage the US even more in selecting its future targets and forcing them to give way under threat of sanctions.