U.S., Japan Still on Collision Course Over Trade : Diplomacy: Clinton and Murayama meet at summit, but neither budges on sanction threat.

Like two drivers hurtling toward each other in a contest of “chicken,” President Clinton and Japanese Prime Minister Tomiichi Murayama eyed each other warily Thursday but kept their nations on course for a monumental trade collision.

With the United States and Japan racing toward a June 28 deadline imposed by Clinton for reaching an agreement to open the Japanese market to U.S.-built automobiles and auto parts, the two leaders made no apparent progress toward easing their dispute.

Murayama said he asked Clinton to remove the U.S. threat of trade sanctions on Japanese luxury cars, which he said violate “the rules and the spirit” of the new World Trade Organization.

Clinton refused to budge, and told reporters after the 90-minute meeting: “I did not and I will not agree to extend the deadline.

“If a solution cannot be found by the deadline, I will impose sanctions,” the President said.

The two leaders, meeting for the first time since their two nations locked onto a course that many fear could lead to a dangerous trade war, are here for the annual economic summit of the world’s seven richest democracies.

But even as they and the five other summit participants, the leaders of Britain, France, Germany, Italy and host Canada, sat down to an informal pre-summit dinner Thursday evening, the U.S-Japanese trade conflict--centered on autos but spreading quickly to include Federal Express air-cargo routes in Asia and Kodak photographic products sales in Japan--threatened to dominate the three days of talks here.

U.S. officials have expressed concern that the rising tide of trade complaints--the aviation and photo issues could lead quickly to sanctions threats--will poison other elements of the U.S.-Japanese relationship.

Stressing the businesslike tenor that he hopes will prevail at the gathering, Canadian Prime Minister Jean Chretien has portrayed the conference as the “Chevrolet Summit,” one in which the splendor of Versailles and Venice, previous summit sites, has given way to the workaday atmosphere of a plain harbor-side office building where the leaders will meet today.

But the question hanging over the gathering, instead, is: Will it be remembered as the “Lexus Summit”?

Depending on the outcome of the two-week period of intense diplomacy the United States and Japan are entering, the meeting Thursday of the President and the prime minister may be seen in retrospect as the conference that, begrudgingly, set in motion a stream of U.S. vehicles on their way to Japan.

Or it might be the meeting that sent the world’s two trading giants into the plunge, locking each other out of lucrative markets not just for autos but for a range of consumer products and services in escalating tit-for-tat commercial warfare.

The only bright spot in the trade picture involved an agreement completed this week to provide tax and other incentives for U.S. firms seeking to invest in Japan.

Even as Clinton and Murayama praised the security ties between their countries, they did little to sugarcoat their differences.

The two men said they did no negotiating on autos, leaving that to senior deputies who are to meet next Thursday and Friday in Geneva.

Only Secretary of State Warren Christopher offered a glimmer of hope that a solution could be found, saying that negotiators on both sides have been given “areas where they can see new agreement.” He noted that many agreements are reached “at the eleventh hour.”

If a solution is not reached by June 28, Clinton says, he will impose 100% tariffs, or taxes, on the import value of 13 luxury models of Japanese automobiles. The imports--by Infiniti, Lexus, Acura, Mitsubishi and Mazda--were worth $5.9 billion last year; the taxes would nearly double their cost in the United States, effectively pricing them out of the U.S. market.