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Financial Post, Weekly edition, Fri 12 May 95, page 5

Keywords: Automobiles Trade disputes Economic summits Sanctions Negotiations United States Japan World Trade Organization Warren Christopher Bill Clinton Mickey Kantor

HOPES PINNED ON HALIFAX: Washington wishes to resolve its trade dispute with Japan at G-7 summit in Halifax before U.S. sanctions take effect.


U.S. Secretary of State Warren Christopher said yesterday Washington hopes to resolve trade differences with Japan at a Group of Seven summit in Halifax before new U.S. sanctions take effect.

''Halifax would provide an opportunity for the prime minister of Japan and the president of the U.S. to discuss these matters and I hope it might be the occasion for resolving them,'' Christoper told reporters in Kiev, where President Bill Clinton was on a state visit.

The G-7 summit of the leaders of Britain, Canada, France, Germany, Italy, Japan and the U.S. - is scheduled for June 15.

The U.S. said Wednesday it was ready to hit Japanese imports with punitive duties and challenge Tokyo's trade practices to force open its markets to U.S. cars and parts.

The target list for U.S. sanctions was to be published in the next few days. Another 30 days is required by law to hear from the public and to narrow the field of targets, leaving leeway for possible negotiation of a compromise deal.

This came as trade diplomats and analysts said the U.S. will face a tough fight to win a case against Japan if it brings its dispute to the World Trade Organization.

But they said Tokyo would be on strong grounds with a counter-complaint that any trade sanctions unilaterally imposed by Washington would be a violation of the rules of the new body.

''This would be uncharted territory, but on the face of it the U.S. would have to prepare its case very carefully if it hopes to prove Japanese trade practices violate specific WTO rules,'' said one analyst following the issue.

U.S. Trade Representative Mickey Kantor indicated on Wednesday that Washington was planning just such a two-track approach to try to prise concessions out of Tokyo.

Japan accuses the U.S. of seeking to manage trade by insisting on being given a fixed part of its market for car parts rather than competing through the free trade practices Washington says it champions.

Both countries played a key role in the creation of the WTO, which replaced the old General Agreement on Tariffs and Trade, and in formulating its newer and tougher rules on promoting freer international commerce.

Under these rules, WTO members are expected to bring disputes that they cannot settle bilaterally before the organization for adjudication by a panel of neutral experts in what is known as a multilateral process.

A panel finding, which must be completed within six months of the presentation of a formal complaint, is binding - although it can also be subject to appeal - unlike under the old GATT.

If the side found to be in violation of the rules refuses to implement the finding and change its behavior, the other side can be authorized by the WTO to take trade sanctions equivalent to the perceived loss.

Trade diplomats say that by publishing a list of Japanese goods to be targeted and then putting sanctions into effect, if it implements its threat, the U.S. would be going against this procedure.

''I don't see how any panel could rule against a Japanese complaint on that basis,'' said a trade diplomat otherwise sympathetic to the U.S. in the dispute.

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Revised: June 3, 1995

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