8:58 AM Jun 21, 1995

US, JAPAN TALK TOUGH ON EVE OF AUTO DISPUTE TALKS

Geneva 21 June (Chakravarthi Raghavan) -- Two senior US officials, from the US trade and commerce departments, insisted Wednesday that the United States would continue to make use of the WTO dispute settlement processes or its domestic trade laws to open up foreign markets.

The two, Chief legal counsel for the USTR, Ira Shapiro, and Undersecretary for Commerce, Jeffrey Garten, who are in Geneva for the talks with Japan -- one over the WTO dispute about sanctions and the other within the framework of the US-Japan framework talks -- told a news conference that during the Uruguay Round negotiations and in the runup to the US acceptance of the WTO agreement, the administration had made clear both to Congress and trading partners that the US would make use of the WTO dispute settlement process for settling disputes but that it reserved the right to use its trade laws on issues not covered by the agreement.

Both officials expounded on the US grievances over the state of the Japanese market, and the protracted bilateral talks that had preceded the US actions, and that while some of the US complaints against Japan could fall within the ambit of the WTO agreements, others like the complaints of the restrictive business practices may not.

Though it is now over a month since the US conveyed a pre-filing notification of intention to raise a dispute in the WTO to the WTO Director-General, the two officials were still talking of the US preparing a broad case of nullification and impairment and intending to bring it before the WTO soon.

Shapiro said of criticism of its unilateral trade sanctions against Japan "To those critical of us, and there are obviously many, I would simply say that the use of S.301 in the past has produced significant benefits of market openings to the world and many countries that have been critical have benefited from this action of ours"

Shapiro was asked whether the US viewed the rest of the world as out of step, since irrespective of the merits of the US complaints over the state of the Japanese markets on the auto issue, virtually all members of the WTO seemed to see the US sanctions -- the 100% tariffs on imports of Japanese luxury cars was violating the WTO and GATT agreements.

Somewhat disingenuously, Shapiro argued that the high tariffs (which are to be backdated to May 20, and with Customs in effect already enforcing them by withholding final clearance) are due to go into effect only on 28 June. Whether it was inconsistent with the US obligations would be decided by the WTO in case the tariffs went into effect. But the US had clearly indicated that in this auto dispute, it would pursue its domestic laws and use the WTO dispute settlement as the second track. As far as the US was concerned, access to the US Japanese market had been a difficult problem for everyone and the US action was reasonable and in pursuance of the bilateral US-Japan accord of July 1993 about the state of the Japanese market and the need for significant market opening and access to new cars and parts.

The answers to questions by the two officials given with a straight face, and statements by other officials in Washington on the eve of the talks, speaking both of strengthening the WTO trading system and its dispute settlement mechanism, and the US right to use its own trade laws and unilateral sanctions, suggested either the US side was suffering from an overabundance of self-righteousness or suffering from a case of schizophrenia.

Without significant advances in the Geneva talks, the sanctions announced would take effect on 28 June, the two US officials asserted, but said that the deadline in the talks with the US would be 28 June.

Meanwhile, on the eve of their auto trade talks (due on Thursday), one on the WTO dispute over unilateral US sanctions and the separate talks on their autotrade dispute within the US-Japan framework talks, the US and Japan were taking tough public positions that would preclude any easy compromises.

While Japanese auto-firms are talking of their plans to diversify their supply sources for auto-parts, due to the high yen value and to take advantage of the cheaper sources elsewhere, Japan's powerful Ministry of International Trade and Industry (MITI) has in effect rejected proposals for Japanese auto-firms agreeing to a voluntary "local content" use in their North American auto-plants.

The United States has been floating this idea, along with agreements of Japanese firms to similarly increase their foreign, meaning US, content in the manufacture of autos in Japan and overseas.

The MITI vice-Minister Tomio Tsutsumi was quoted on Monday as ruling out such compromises on the ground that they would constitute a clear violation of the WTO trade rules.

Meanwhile in a speech in Washington Tuesday, the US Trade Representative, Micky Kantor spoke both about US commitment to open markets and upholding the WTO system, including its dispute settlement mechanism, and at the same time using bilateral commitments and US trade laws to expand overseas markets for US trade and investments.

Kantor said: "The Uruguay Round, as important as it is, and as critical to building global growth, does not cover all aspects of acts, policies or practices of every government. To the extent those acts, practices or policies are not covered, every nation, not only the US, every nation retained its right to enforce its own trade laws, to the extent they are not inconsistent with the Uruguay Round declarations and understandings. We believe that act of preserving sovereignty is critical and we're going to continue to do it. We would like to see the Uruguay Round commitments expanded. We would like to see the WTO expanded, we would like to see the dispute settlement mechanism not only work, but cover more areas like competition policy or corruption and bribery or worker rights or other areas. But they don't. So unless and until they do, we will continue to use our trade laws to assert legitimate US interest in opening markets and expanding trade."

It would be difficult to find a clearer enunciation of US intention to continue to flourish and use its threats of unilateral trade sanctions to get acceptance of its views on all these questions, and the acceptable policies on these of other countries.

Only negotiators in Geneva and high trade officials at the WTO, including its executive head Renato Ruggiero could continue to talk of the US auto-dispute actions (unilateral sanctions and intimations of its intention to use the WTO's dispute settlement mechanism) as indication of the US resolve to strengthen the WTO system.