2 Japan Carriers Face Threat of Sanctions in U.S. : Trade: More stress is put on bilateral ties as Washington prods Tokyo on behalf of Federal Express.

A thorny U.S.-Japan dispute over transpacific aviation heated up Monday as the Clinton Administration announced plans to levy sanctions against two Japanese airlines next month unless Japan agrees to allow Federal Express into Asia via Japan.

The timing of Monday’s announcement puts yet more stress on a bilateral relationship already strained by an acrimonious battle over automobile trade.

Officials at the U.S. Transportation Department denied that the government orchestrated the aviation case to send a signal of general U.S. resolve to the Japanese government in hopes of reaching a quicker settlement on the auto dispute.

“The timing during the discussions over automobiles is more coincidental than anything else,” said one top U.S. transportation official, who asked not to be named. “We have tried very hard to resolve the matter in negotiations, but there is a point beyond which we’re left no reasonable alternative.”

Last month, a Japanese official said Tokyo would retaliate if the U.S. government imposed sanctions in the aviation case, but he did not give specific targets.

Since the newly created World Trade Organization does not cover air traffic rights, the Japanese government cannot appeal to that body.

While Monday’s announcement puts more pressure on the U.S.-Japan relationship, having two deadlines on the agenda could also give the Clinton Administration leeway to find compromises in both, according to Rich Ellings, director of the National Bureau for Asian Research, a think tank in Seattle.

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“While it may appear to be widening the trade war front, on the other hand it gives them more options for compromise and more leverage to negotiate a face-saving measure,” he said.

Ellings suggested that the Administration’s decision to proceed with the aviation sanctions may have been due to the strong bipartisan support given to its decision to impose 100% tariffs on some Japanese luxury cars unless agreement is reached by June 28.

“The timing and choice of issue may not have been the greatest, but in general, getting tough with Japan has proven to be fairly popular, even in business circles,” he said.

The proposed aviation sanctions would restrict Japan Air Lines and Nippon Cargo Airlines from carrying cargo into the United States from some Asian countries. The target countries would be chosen from among Hong Kong, Indonesia, Singapore, Taiwan and Thailand after a public comment period ends July 14.

Bill Mosley, a Transportation Department spokesman, said the agency does not expect the proposed sanctions to have much impact on U.S. companies, because there are sufficient alternative cargo carriers serving those markets.

JAL and Nippon Cargo executives in Los Angeles said Monday that they did not yet know how the proposed restrictions might affect their business.

But JAL spokesman Morris Simoncelli called the U.S. action “highly regrettable” and said sanctions would cause “considerable inconvenience” to the Japanese airlines and their customers.

A U.S. transportation official said it is difficult to predict the impact since the scope of the sanctions has not been determined.

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The source of the U.S. frustration is Japan’s unwillingness to approve flights by Federal Express between Japan and Subic Bay in the Philippines, as well as other points in Asia. Those flights were scheduled to begin May 1.

The U.S. government argues that those flights, which were requested in February, are allowed under a 1952 bilateral air service agreement.

The agreement dictates the routes each country controls over the Pacific. U.S. airlines are allowed to pick up passengers and cargo in Japan and fly on to Asia and Australia, while Japanese airlines are allowed to make pickups in the United States and fly on to Latin America.

But the Japanese government believes that the agreement, made during a time when Japan had no national air carrier and U.S. airlines controlled the Pacific, gives unfair advantage to American carriers, which already control about 70% of transpacific air traffic.

Resolution of the dispute is of critical importance to U.S. carriers that want access to the fast-growing Asian air travel markets.

Negotiations for expanded U.S. landing rights in Japan, including access to Osaka’s new Kansai airport, have been hung up in the last few years as a result of the disagreement over the bilateral treaty.

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ELEVENTH-HOUR MANEUVERS

A broad outline of possible compromises on U.S.-Japan auto trade is taking shape. D3