Japan-U.S. Trade Report FAX

Foreign Reaction to Reinstitution of Super 301

Congress Still Pressing Administration on Steel

U.S. Proposes Forum on Bilateral Disputes and Deregulation

FOREIGN REACTION TO REINSTITUTION OF SUPER 301

The initial GOJ reaction, including Prime Minister Obuchi's statement that Japan would be watching U.S. practices under Super 301 "carefully," has been somewhat more restrained in recent days. In particular, Japanese Ambassador Kunihiko Saito stated last week that it "is not appropriate to take the reinstatement as Washington's attempt to target Japan."

For their part, EU officials have stated that U.S. action under Section 301 would violate various U.S.-WTO obligations. The EU is moving forward on its threat to challenge the mere existence of Section 301 before the WTO. The EU's complaint regarding Section 301 originated as part of the U.S.-EU banana dispute. In that case, USTR published a list of retaliatory tariffs after a WTO panel found EU's import regime to be in violation of WTO rules. The results of the EU's challenge to the U.S. law could have profound implications for U.S. trade policy.

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CONGRESS STILL PRESSING ADMINISTRATION ON STEEL

However, the U.S. steel industry continues to press Congress to seek some form of legislative remedy to protect U.S. steel interests. Rep. Pete Visclosky (D-IN) has introduced a draconian bill that would restrict imports of all foreign steel to a monthly quota for a period of three years. This proposal has only a minimal chance of moving forward through the legislative process, and was most likely intended as a means to maintain pressure on the Clinton Administration to take some action on steel.

We do not expect the Clinton Administration to respond in any significant manner to this legislative initiative. The Administration's strategy behind its "steel plan" (i.e., to allow time for the steel dispute to resolve itself) appears to be working. As long as steel imports continue to fall, the Administration should be able to argue that its "plan" has alleviated the situation and the imposition of any trade remedy against the GOJ is unnecessary.

With regard to steel, we also note recent reports that the GOJ is considering requesting a WTO dispute resolution panel challenging a lawsuit filed by a U.S. steel producer against three Japanese steel importers. This suit, which is based on the U.S. Antidumping Act of 1916, is private legal action available to U.S. companies and is completely distinct from the ongoing dumping proceedings before the Department of Commerce. The GOJ is presently considering whether to challenge this Act on grounds similar to those alleged by the EU in its present WTO panel on the same issue.

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U.S. PROPOSES FORUM ON BILATERAL DISPUTES AND DEREGULATION

Last week, MITI Vice Minister Osamu Watanabe appeared to respond favorably to the U.S. proposal for such bilateral talks. He indicated that while the GOJ has not firmed up its stance on these talks, the GOJ believed regular contact would aid in avoiding potential differences between the two governments. In addition, U.S. Ambassador Thomas Foley indicated the U.S. government was interested in extending the scope of the current deregulation initiative, but was not in favor of creating a new negotiating regime.

In other trade news, the United States continues to criticize the GOJ's decision to impose "astoundingly high" tariffs on rice imports, as characterized by Secretary of Agriculture Daniel Glickman last week. Glickman would not comment on whether the United States intends to challenge the tariff scheme before the WTO, but stated that a joint USTR and Agriculture Department team is presently reviewing the matter.

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