U.S., Japan Dispute Over Aviation Rights Heats Up : Relations: Meanwhile, auto trade quarrel remains at a standoff. Washington rejects Tokyo’s request for urgent talks next week.
A long-smoldering U.S.-Japan argument over Pacific Rim aviation rights has suddenly heated up, with talk in Washington and Tokyo of possible sanctions and counter-sanctions.
Meanwhile, a bitter dispute on auto trade remained at a standoff. The Clinton Administration on Friday rejected Japan’s request for urgent auto trade talks next week, suggesting instead that such talks begin in Washington on June 20. Tariffs of 100% on $5.9 billion worth of Japanese luxury autos are scheduled to take effect June 28.
The U.S. announcement rebuffed a Japanese effort to get consultations started quickly, which would have cleared the way for a fast-track decision from the Geneva-based World Trade Organization. Under normal WTO rules, a final resolution could take a year or more, allowing the U.S. sanctions against 13 models of Japanese luxury cars to remain in effect.
A spokesman for Japan’s Ministry of International Trade and Industry said the U.S. action declining urgent talks had been expected. Japan could still apply as early as June 5 to initiate fast-track action by a multinational panel, he said. But Tokyo may prefer to wait to seek such a ruling until after Washington has carried out the sanctions threat, in belief that it would win greater support for its position, the spokesman added.
U.S. Trade Representative Mickey Kantor said in a letter to Japanese Minister of International Trade and Industry Ryutaro Hashimoto that the auto dispute should not confuse the broader international issues that are to be taken up at the Group of Seven summit in Halifax, Canada, in mid-June.
Kantor rejected Japan’s claim that the U.S. threats of sanctions are inconsistent with WTO rules, saying that every country has a right to enforce its trade laws.
In the aviation dispute, Washington charges that Tokyo is refusing to live up to the terms of a 1952 civil aviation agreement that grants essentially unlimited rights to three U.S. airlines to fly to Japan and on to other East Asian destinations.
Specifically, the United States is protesting Tokyo’s refusal to approve a new United Airlines passenger route between Osaka and Seoul and a Federal Express cargo route from Tokyo to the Philippines. The Federal Express route is of central importance to the firm’s plans to operate a new cargo hub at Subic Bay.
However, Tokyo argues that the pact is “unilaterally favorable” to the U.S. side and should be revised before approval is given to U.S. carriers for additional routes connecting American and East Asian cities by way of Japan.
The aviation dispute first heated up publicly on Thursday in Tokyo, when Vice Transport Minister Michihiko Matsuo told a news conference that U.S. requests for flights in the Asian market via Japan are “excessive.”
“We have already started work on countermeasures against U.S. sanctions,” Matsuo said. “If Washington cuts Japanese airlines’ flights to the U.S., Japan is ready to take similar steps for those of U.S. airlines.”
The U.S. Embassy held a news briefing Friday at which a U.S. official declared that Japan’s actions are “a violation” of the 1952 agreement.
“This current dispute reflects the fundamentally different approaches of the U.S. and Japan towards civil aviation,” said the embassy official, who spoke on condition he not be identified. “The U.S. wants a free and open market for international aviation. Japan is trying to strengthen bureaucratic control over a private industry.
“The ability of U.S. carriers to serve Asia is important not only to profitability of U.S. airlines, but also to Japanese consumers. An open airline industry in Japan will mean lower fares with greater choice for consumers.”
Bureaucratic regulation and controls on competition help ensure that air fares for international flights originating in Japan are among the highest in the world. Even so, Japanese airlines are facing difficulty as a result of high operating costs and increased competition, and now foreign carriers are undercutting prices.
U.S. airlines went through a painful restructuring in the 1980s and are now far more efficient than Japanese carriers. U.S. costs average about 10 cents per passenger mile, whereas Japanese costs are 18 cents per passenger mile, the embassy official said.
Because of these differences in costs and price-setting practices, the attempt by U.S. airlines to fully exercise the rights granted by the 1952 treaty represents a threat to the profitability of Japanese competitors.
