6:31 AM Jun 13, 1995

US-JAPAN TALKS DEADLOCKED, BOTH SIDES TO REFLECT

Geneva, 13 June (Chakravarthi Raghavan) -- Nearly seven hours of consultations at the WTO Monday between the United States and Japan, with Australia participating as a WTO member with "substantial trade interest" in the dispute, appear to have been deadlocked, with the two sides sticking to their positions but not formally breaking off.

The two sides though shared the same podium at the WTO conference room to read statements to the media (but would not take questions).

The statements by the US deputy head of the Mission, Andrew Stoler and the leader of the Japanese delegation, Kazuo Asakai who is the Director-General of International Economic Relations in their Foreign Office, and the background material made available by the Japanese delegations, showed that both sides have stuck to their positions and no agreement had been reached in the consultations.

But it was not clear whether there will be further talks or whether as the complaining party against whose trade the US has imposed unilateral trade sanctions would invoke the WTO's Dispute Settlement Understanding and seek a panel or any other course.

"Both parties will now have to reflect," the Japanese chief delegate, Kazuo Asakai, Director-General of International Economic Relations in their Foreign Office, told newsmen (who crowded around him) as he left the WTO building. Stoler made no comments.

Asakai's response to newsmen seemed to imply that Tokyo is yet to decide on what to do.

Though other Japanese sources said that the ball was now in the US court, the impression left at the end of the day was that Japan at the minimum would avoid any actions here ahead of the G-7 Halifax Summit, even though its position is it would not negotiate on the substantive questions that the US side has been raising.

Other trade diplomats have been of the view, and privately concerned, that Japan would find some compromise with the US as neither can in fact afford a bruising fight and that the compromise might damage the WTO trading system, and at the minimum encourage the United States (and others so inclined) to take unilateral measures or hold out threats to gain their way while the system has shown that it cannot provide any quick relief in such matters.

The conditions set out by Asakai, in his statement to the media, about resumption of the substantive auto-parts talks with the US would seem to present the US government with the problem of how to retreat in its announcement of sanctions without seeming to do so.

However, the Japanese private auto-industry companies might undertake some moves to increase their purchases of US-made autoparts, and announce it, so as to provide the US a way out for "suspending" its trade sanctions.

A news report from Tokyo on Tuesday appeared to suggest that the Japanese private auto-manufacturers were in fact planning this -- agreeing (without the formal government involvement that the US wants) to buy more foreign autoparts - in reality US parts.

News reports quoted the Japanese daily Nihon Keizai Shimbun as reporting that the Mazda company (in which the Ford Motor Company of the US has a 24.54 percent share) will buy foreign-made autoparts as a way of cutting its own costs due to the high yen.

The Japanese daily report, quoted by Reuters, said Mazda would be increasing its purchases abroad from the current five percent to 30% by 1997-98.

But a Mazda spokesman was quoted as saying that such a target would be impossible to attain by 1997/98 but that "naturally, not only Mazda but other car makers will increase their purchases of overseas-made parts for the sake of cost-cutting and to take advantage of the strong yen"

In his statement to the media, Asakai had said that Japan was read to resume negotiations on auto and auto-parts issues under the Japan-US Framework talks, "if and when US government withdraws its determination of May 10 and May 16 (about the intention to levy a 100% duty on imports of Japanese luxury cars and backdate it to 20 May) including its withholding of liquidation (customs final clearance of the imports landing at US ports after 20 May)."

The Asakai statement also set as a condition for the resumption of the talks on the auto and autoparts issues that the US "ceases to request de facto numerical targets, namely the parts purchasing plans as well as a target for the number of dealers handling foreign vehicles."

"We believe, such a change of the position would allow us both to move forward and to reach a successful conclusion concerning the auto and auto-parts issues:"

Stoler, in the short prepared statement he read out, said that in holding the consultations under Art XXII as per Japan's request, the US had adhered to its WTO obligations under the DSU, and that Japan had sought the consultations after the USTR had "found Japan's actions and policies in the aftermarket auto parts sector are unreasonable and unjustifiable" and announced the possible imposition of 100% duties on luxury cars imported from Japan in response to these acts and policies.

In the consultations, he said, the US had expressed regret that "Japan's unwillingness to open its markets in this sector had led the USTR to announce these possible measures" and the US government believed that its actions were "in full compliance" with its WTO obligations.

For his part, Asakai who followed Stoler, reiterated the Japanese position that the US measures, announced or implemented, were in clear violation of the obligations under the WTO, that the US resort to unilateral measures under S.301 of its trade law while invoking the dispute settlement mechanism of the WTO on the same issue "seems inconsistent and contradictory".

Japan, Asakai said, had urged the US in the talks to withdraw its determinations and the withholding of customs liquidation, and "wishes to make it clear that it is still seeking the settlement of the dispute as a case of urgency". The objective of the consultations, he said, was to address the US unilateral measures inconsistent with the WTO and not the autoparts issue as such.