Tokyo Ponders Options in Face of Auto Tariffs : Trade: Japan files formal complaint with WTO, says it may be forced to retaliate.

Sorting out its options in the rapidly escalating trade dispute with the United States, Japan moved on two fronts Wednesday against U.S. threats to impose 100% tariffs on some luxury car imports.

In Geneva, Japan filed a formal complaint with the World Trade Organization, triggering a dispute-settlement process that will probably begin with a new round of direct negotiations between Tokyo and Washington.

Meanwhile, a top Japanese trade official said that even though his government believes the promised U.S. sanctions violate WTO rules, Tokyo might be forced to take direct counter-retaliatory measures.

Yoshihiro Sakamoto, vice minister of International Trade and Industry, said that if this scenario unfolds, the world’s two most powerful economies will both be violating WTO rules, possibly throwing the newly established global trade organization into confusion.

Sakamoto said it would theoretically be possible for Japan to take finely tuned retaliatory action without violating the WTO rules, which generally ban unilateral measures against other members.

But he said such steps could have only a tiny fraction of the impact Japan would feel from the $5.9 billion in punitive tariffs threatened by the United States against 13 models of luxury cars.

Thus, if the United States carries out its threats, acting as both “prosecutor and judge,” Japan may respond in kind, Sakamoto said at a Foreign Correspondents Club news conference.

“I’m not saying we’ve decided to introduce counter-retaliation,” he said. “But there’s a possibility for us to be forced into retaliatory measures.”

Under WTO rules, the United States has 10 days to say whether it will reopen bilateral negotiations. If it declines, or if talks fail to produce a settlement, Japan can then make a formal complaint to the WTO’s dispute-settlement body. Previously, U.S. officials have vowed to file their own complaint with the trade body.

If the multinational dispute-settlement panel finds a complaint is justified, it can instruct the offending party to cancel the measures judged to be in violation of the rules. If the panel refuses, the complaining party is then authorized to take corresponding sanctions. Under WTO rules, retaliatory tariffs should be imposed only after this process has been completed.

The Japanese position has already received support from European Union Trade Commissioner Leon Brittan, who said the threatened U.S. tariffs, if enacted, would indeed violate WTO rules. Brittan also said the U.S. action could endanger the effectiveness of the new body.

The United States argues that the tariffs would not violate WTO rules because their purpose is to respond to restrictive business practices not addressed by the global organization.