Yuetter Says U.S. Retaliation Near in Trade Dispute : Envoy Cites 3 Areas of Conflict With Japan as Ministers Gather for Talks

From Reuters

Trade Representative Clayton K. Yeutter said Sunday that his country and Japan were on the brink of serious conflicts over trade.

At one stage Yeutter used the term "trade war" when speaking to reporters but backed off when questioned further at a reception on the eve of a two-day meeting of world trade ministers.

The ministers are here to review progress made since a round of negotiations in Uruguay last September and will prepare for a full-scale conference of the General Agreement on Tariffs and Trade in Venice in June.

Yeutter said the United States and the European Community came "very close to a trade war" over the issue of who should supply cereals to Spain.

"We are very close to that now with Japan, at least in terms of a potential retaliatory response by the United States over two or three controversial items," he added.

Asked to repeat the phrase, Yeutter replied: "No, not trade war, but in terms of a potential retaliatory kind of action by the United States."

Yeutter said the three issues were semiconductors, Japanese government unwillingness to see public entities buy U.S. supercomputers and the barring of U.S. firms from the multibillion-dollar Kansai airport project near Osaka.

The Times reported on Saturday that sources close to the trade dispute said top Reagan administration trade officials will recommend that sanctions be imposed on Japanese goods, including consumer electronic products such as VCRs, in retaliation for repeated violations of a trade agreement on semiconductors. The sanctions are to be considered by the Cabinet's Economic Policy Council at meeting Thursday, before a final recommendation is made to President Reagan.

EC Commissioner Willy de Clercq, meanwhile, told reporters he did not like the term trade war and preferred to call such disputes "serious conflicts."

He added that fights among the world's three major trading and economic powers--the EC, the United States and Japan--set a poor example for other GATT members.

"There is a saying in French: noblesse oblige . I think that when you belong to the most powerful, most important (countries) you bear responsibilities, and when you bear responsibilities you have to live accordingly," he said.

Australian Trade Minister John Dawkins told reporters that bilateral retaliation at the enormous expense of the rest of the world was no way to solve trade disputes.

New Zealand Trade Minister Mike Moore told his colleagues from more than 20 nations that the next round of international trade negotiations would be the last this century and that the cost of failure could not be measured.

He said great progress had been made in preparing for the negotiations, which must not be sidetracked.

"We live in troubled and dangerous time for the world trading system," he said.

"We have seen that the failure of the world trading system has caused great depression and conflict in the past. Our failure to maintain the momentum will be at great cost to us all," Moore said.

The Uruguay meeting is considered by most countries to have been particularly successful, with Northern Hemisphere countries managing to have service industries such as banking and insurance included in the next full round.

The southerners' goal of including agricultural and tropical products also was met.

Yeutter said the problem with international trade talks was that they tended to get bogged down for years.

He also said he did not consider the new U.S. Congress to be protectionist, although some members were.

"Members of Congress, that is, the contemplative members of Congress, have begun to realize protectionism is not the answer to the $170-billion trade deficit.

"They've also begun to realize that you cannot legislate solutions to a $170-billion trade deficit, so they are more realistic," he said.

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