U.S. Files Trade Complaint Against Japan

The Clinton administration, after three years of picking face-to-face fights with Japan over trade, decided Thursday to dump a contentious Kodak-Fuji dispute in the lap of the World Trade Organization.

But the high-stakes gamble could backfire if the international tribunal that U.S. opponents love to hate sides with the Japanese.

Commerce Secretary Mickey Kantor and other top administration officials said an 11-month U.S. investigation had determined that the allegations made by Eastman Kodak Co. are accurate.

Kodak charges that Japanese rival Fuji Photo Film Co. and the government of Japan had conspired to erect an intricate web of anti-competitive barriers that keep Kodak products from being widely distributed in Japan.

Administration officials described their World Trade Organization case as a landmark one that will, for the first time, confront the Japanese system of kereitsu, the interlocking relationships among businesses and the government that foreign companies have complained keep them out of the huge Japanese market.

“This trade action is not simply about Kodak and its barriers in Japan,” Kantor said. “It is about fairness and providing the same fair market opportunities for American workers and American companies in Japan as Japan enjoys in the United States.”

The administration’s decision represents an abrupt about-face from the way it has handled previous high-profile trade disputes with Japan, such as last year’s auto fight, in which an agreement was reached at the last minute under threat of $6 billion in U.S. sanctions.

In the film case, however, the Japanese government for 11 months steadfastly refused to even talk to U.S. negotiators, saying it would no longer be bullied by the threat of unilateral sanctions under Section 301 of the U.S. trade law.

The fight between the two film giants has employed a legion of Washington lawyers. Both sides have taken out full-page advertisements in American newspapers to argue their cases.

Japanese Trade Minister Shunpei Tsukahara called the administration’s decision to resolve the film case under WTO rules as a “constructive step,” although he rejected the specific allegations.

“The United States government seriously misunderstands the structure of and practices in the Japanese photographic product markets,” he said in a statement.

Kodak praised the administration’s action, even though earlier this year it had urged it to push forward with the Section 301 case and argued that only a portion of Kodak’s complaints represent violations of World Trade Organization rules. Kodak contends it has lost $5.6 billion in sales since 1975 in Japan because of the trade barriers.

“The world’s spotlight is now focused on the closed nature of the Japanese consumer photographic market,” Kodak Chief Executive George M.C. Fisher said.

The U.S. complaint accuses the government of Japan of acting in a way that nullifies global trade rules. It also alleges “significant evidence of anti-competitive activities” by Japan.

Fuji called the administration’s decision “a positive development in a very complex case” and predicted that the Japanese company will be vindicated by the World Trade Organization.

Administration officials refused to rule out the use of U.S. sanctions should the administration lose the case.

A final ruling is 12 to 18 months away, depending on appeals.

The World Trade Organization came into existence on Jan. 1, 1995, as a successor to the largely toothless General Agreement on Tariffs and Trade.