Japan Steps In on Sumitomo Cancellation : Trade: Government gives Bush Administration a low-key ‘reminder’ of pact saying nationality should not be a factor in contracts. Firm lost deal for Metro Green Line rail cars.

Japan has quietly and indirectly raised with the Bush Administration its concern over Los Angeles County’s rejection of a contract with the Sumitomo Corp. to build vehicles for the Metro Green Line, a Japanese government spokesman told The Times on Thursday night.

In an interview, Masamichi Hanabusa, the official spokesman for Japanese Prime Minister Kiichi Miyazawa, said that Japanese diplomats have “reminded” the Administration that international trade agreements require the U.S. government to inform localities of the importance of awarding contracts without regard to nationality.

“Please don’t take it as a protest. It is a general reminder,” Hanabusa said. But he acknowledged that “the timing” of the Japanese government’s recent message to the Administration was prompted by Los Angeles’ decision to deny Sumitomo the rail car contract.

Sumitomo’s Los Angeles-based unit, Sumitomo Corp. of America, was awarded a $121.8-million contract last month to build the Green Line’s 41 driverless cars in Japan, even though its bid was 4% above its only other competitor, Morrison-Knudsen Corp. of Idaho.

That decision, following announcements of plant closings in Southern California’s aerospace and automotive industries, outraged many skilled workers who thought the cars should be built in Los Angeles. Led by politicians from City Hall to Capitol Hill, critics hounded the commission to cancel the Sumitomo deal last week and look for a way to build the cars locally.

There was no indication that Japan is trying to enlist the Bush Administration’s help in attempting to reverse the outcome of the Sumitomo dispute. Hanabusa emphasized that Japan is aware that the U.S. government has no legal authority over the Los Angeles agency.

However, the action shows Japan’s concern over the proliferation of recent trade disputes such as the Sumitomo case and the publicized furor over a Nintendo subsidiary’s offer to purchase part of the the Seattle Mariners baseball team.

It also suggests that in the future Japan may be more assertive in defending the right of Japanese companies to bid for contracts in the United States. In particular, Japan may invoke the same trade agreements that American companies have used in seeking contracts in Japan.

Bush Administration officials could not be reached for comment Thursday night on Japan’s message, which Hanabusa said was sent recently through “normal diplomatic channels.”

Los Angeles County Transportation Commission Executive Director Neil Peterson said that the commission “will certainly cooperate with our government on this issue,” but he criticized the Japanese for raising the subject, even informally.

“It is ironic that the government of Japan would lodge a complaint based on cancellation of the Green Line contract when it is recognized internationally that their markets are virtually closed to foreign competition,” Peterson said.

The clause that Japan invoked in its message to the Bush Administration is part of the General Agreement on Tariffs and Trade, the principle agreement governing international trade.

One section of the GATT code applies to government procurement. It flatly prohibits governments from discriminating on the basis of nationality when they award contracts. This clause applies only to national or federal governments and not to municipalities.

But another section of the GATT code says that all members shall inform local governments of the agreement’s objectives, principles and rules, “in particular the rules on national treatment and non-discrimination.”

American construction companies invoked this provision when they were seeking contracts in Japan for construction of the new Kansai airport near Osaka. Because the contracts were being awarded by local authorities in Japan, the American firms urged the Japanese government to intercede with the localities and urge them not to discriminate against foreign companies.

Industry leader AEG Westinghouse of Pittsburgh lost a bid to build a “people mover” system at the airport. The job went to a less-experienced Japanese company.

Nonetheless, officials of Japan’s national government are said to believe that they helped open the way for American companies to win some of the construction contracts at Kansai. And Japan is now reminding the Bush Administration that the same section of the GATT code applies equally to the awarding of local contracts in the United States.