A shift in focus for US-Japanese feud

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The Independent Online
TWO NEW and potentially bloody trade disputes are about to erupt between the United States and Japan, despite the compromise deal struck over trade in cars and car parts. The latest developments threaten to rock the fragile peace, following the deal late on Thursday.

The Clinton Administration is expected to make formal complaint - possibly as soon as tomorrow - against Japan for alleged collusion with the Fuji Photo Film company to frustrate Eastman Kodak's plans to expand in the Japanese market.

Meanwhile, high-level talks are set to begin between trade officials of both sides in Washington in mid-week to try and avert a confrontation over air cargo traffic, triggered by Tokyo's refusal to allow Federal Express to land in Japan as it pushes to enlarge its Asian operations.

The renewed friction comes only days after the two governments retreated from the brink of a big trade war over cars and parts. While the US negotiator, Mickey Kantor, extracted an agreement from Japan to increase access to its domestic market for US autos and parts, along with promises from Japanese manufacturers to step up production in North America, the deal offered no enforceable targets and is being criticised by some as too fuzzy.

"I wouldn't call it historic," remarked Gary Saxonhouse, an economics professor at the University of Michigan. "In fact, there is far less explicit Japanese government commitment to reaching stated goals in this agreement than is true of many trade agreements signed in the past".

Action by the Administration in the Fuji case is likely after the recent submission by Kodak of a 250-page report that detailed what the company alleges has been a systematic fixing of the Japanese photo film market to maintain Fuji's hold over it. It claims Fuji, with the support of the Japanese government, offered cash payments to retailers to exclude outside competition.

With Kodak holding less than 10 per cent of the Japanese photo film market, compared with its 40 per cent market share in Europe, US government officials are reportedly convinced of the case against Fuji and Tokyo. Though the sector is clearly less important - both economically and in symbolic terms - than the car industry, Washington may be quickly tempted into another test of wills with Tokyo over the issue.

In the cargo dispute, Japan is accused of breaking a 1952 aviation treaty by refusing to allow Federal Express to touch down in Japan en route to a new hub in the Philippines. Already, the US is proposing retaliation by severely curtailing cargo routes to the US currently on offer to Japan Air Lines and Nippon Cargo Airlines. The talks in Washington on Wednesday will aim at averting these sanctions.

q Kawasaki, the Japanese industrial giant, will be arriving in Britain on a massive DTI-backed shopping spree on 18 July. It is trying to counter the strength of the yen by sourcing more components from abroad, and says it wants to double its procurement from Britain, currently worth pounds 40m a year.

Garel Rhys, motor industry professor at Cardiff Business School, says Japanese companies "are looking at the high yen as a long-term problem, and recognise that the quality available outside Japan has improved immeasurably".