Two Big Traders Playing With Fire : U.S. and Japan still can make up without going to ‘court’

Irreconcilable differences? Fed up with a Japan unwilling to open its markets to more U.S. cars and automobile parts, an angry Clinton Administration has slapped sanctions on imports of luxury Japanese cars. The World Trade Organization may be the ultimate arbiter in this latest and particularly nasty trade standoff. There is still time, of course, for the two nations to head off a situation that could have political and security repercussions.

Both the United States and Japan have behaved badly in the long auto talks. Tokyo has accused the United States of seeking managed trade in asking for some voluntary measures. Washington maintains that the measures would merely allow Japanese consumers to determine whether there is a bigger market for American cars and auto parts.

WTO’S FIRST BIG JOB: The difference in perspective reflects the two nations’ economic systems: America’s consumer-based, Japan’s industry-based. With little progress in the talks, U.S. Trade Representative Mickey Kantor began to raise the threat of sanctions. That the Administration has had to make good on its threats is indeed regrettable.

The punitive duties of 100% on imports of luxury Japanese cars, beginning Saturday but not collected until after June 28, are unprecedented. They do, though, send a clear signal of Washington’s frustration, and Japan has apparently gotten the message. Within an hour of the White House announcement of the sanctions, Japan called for a meeting of U.S. and Japanese trade negotiators in Geneva. Tokyo also has filed a complaint against the United States with the WTO, the successor organization to the General Agreement on Tariffs and Trade.

So the world’s two largest traders, both WTO signatories, present the new trade organization its first big dispute. The organization does not even have its dispute resolution mechanism in place. The process thus probably would take some time, and its outcome would be uncertain. The WTO wants the two parties to start talking again.

Meanwhile, Washington and Tokyo have been unable, and perhaps unwilling, to break their classic dysfunctional pattern of brinkmanship in trade talks. Only when pushed to the limits by an aggressive (critics say overly aggressive) United States does Japan deliver credible trade agreements.

To its credit, Tokyo has committed to trade pacts with the United States on construction, telecommunications equipment, apples and glass. But autos and auto parts from Japan account for about 56% of the $65.7-billion U.S. trade deficit with Japan. The Clinton Administration believes that without real progress on the auto front, the imbalance will worsen.

SHADOW OF POLITICS: Tokyo is willing to compromise on some deregulation issues, and to allow more Japanese auto dealerships to sell American cars. But it has held steadfast against Washington’s request for commitments to “voluntary” plans to purchase more American-made auto parts. The government says it cannot make such commitments on behalf of Japanese companies.

Muddling the process are the political ambitions of Japanese Trade Minister Ryutaro Hashimoto, who wants to be the next prime minister, and President Clinton’s attention on the coming presidential race. Each are playing to domestic audiences.

Trade issues have long been dealt with separately from U.S.-Japan political and security issues. That should be the case this time, too. Otherwise, this latest dispute could undermine an important bilateral relationship in more ways than one. Tokyo and Washington should show the world they can still resolve sticky trade issues. If this doesn’t happen, the WTO will have to decide the matter.