Japan, U.S. to Discuss GATT Chip Ruling

From Reuters

Japanese officials left on Wednesday for talks in Washington on a disputed U.S.-Japan microchip pact, but little hope remains of satisfying conflicting American and European demands on the issue, a Japanese trade official said.

Japan wants to end disagreements over a ruling last month by a General Agreements on Tariff and Trade panel on the 1986 U.S.-Japan semiconductor pact under which Tokyo pledged to avoid selling computer microchips at below cost.

Japanese companies currently dominate nearly half the world market for semiconductors, tiny slices of silicon which are the heart of a myriad of modern electronics products.

The European Community has said the panel ruling upheld its complaint that the U.S.-Japan agreement violated GATT trade nondiscrimination provisions. But U.S. officials say the ruling concerned implementation of the pact rather than the pact itself.

"We realize it is almost impossible to find some solution between the two (the United States and the EC)," an unidentified Ministry of International Trade and Industry official said.

"We will have to decide by ourselves. We will find the best solution even though it is not safe," he said. A unilateral decision could leave Japan open to criticism from both sides, he said.

The European Community says the pact broke GATT rules because keeping Japanese export prices high improved the competitive position of U.S. microchip exporters and raised the costs for EC users of such products.

But Deputy U.S. Trade Representative Michael Smith told reporters here last week, "The key finding (of the panel) was that the measures the Japanese government used to enforce the third-country anti-dumping provision, in their totality, were inconsistent with GATT.

"The statesman-like thing would be for the two governments to sit down and figure out something that is totally GATT consistent," Smith said.

Tokyo, seeking some maneuvering room between the opposing U.S. and EC positions, has been singing different tunes in its talks thus far with Brussels and Washington.

Japan has told the United States that following the GATT panel ruling it cannot continue any of the measures it has used to keep Japanese companies from dumping semiconductors, the MITI official said.

But he said when talking to the EC, Japanese officials expressed the view that the panel ruling did not ban specific anti-dumping steps, only the particular combination of measures currently being used to implement the pact.

"We try to expand our maneuverability, otherwise we will be squeezed," the MITI official said.

To implement the bilateral pact's anti-dumping provision, Tokyo has been asking companies not to sell at below cost. It also has been monitoring chip export prices and issuing supply-demand forecasts, the official said.

World demand for microchips, in a slump at the time the pact was concluded, is currently soaring, and industry analysts said a halt to Japan's export price monitoring system was unlikely to lead to dumping anytime soon.

But an unsatisfactory solution to the dilemma now could well leave Japan vulnerable to future friction with both Washington and Brussels, the MITI official said.

"Both can raise the issue in the future," he said.

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