Tokyo digs in over car exports

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DAMAGING trade rows threaten to undermine relations between the European Community and its two main trading partners, the US and Japan.

The European Commission yesterday failed to reach agreement with Tokyo over car imports and signalled that it would resolve Brussels' battle with Washington over steel imports through the General Agreement on Tariffs and Trade.

A meeting in Tokyo, aimed at regulating Japanese car imports to the EC, ended inconclusively. The EC is trying to convince Tokyo that in the face of a sharp downturn in European sales Japan must scale back exports.

Under a 1991 agreement the two sides 'monitor' trade, a term that the EC says implies a commitment to reduce exports to reflect demand forecasts. Tokyo does not accept that obligation, although the government is now convinced that 1993 will be worse than expected.

The EC, according to senior advisers, fears that sales of cars and light commercial vehicles could be 4-6 per cent lower this year. Japanese exports last year fell by 6.2 per cent in line with the agreement, which is part of a seven-year plan for the EC to dismantle all barriers to Japanese car exports. Tokyo is reluctant to cut back still further. A Commission official said yesterday he was hopeful that a deal could be struck by the end of the month but no further meetings have been scheduled and the two sides are still far apart.

In an effort to resolve the other trade row, this time over EC steel exports to the US, the EC announced yesterday that it had formally requested talks with the US under Gatt rules.

Washington has announced that it intends to slap punitive anti-dumping duties on EC steel products. Seven EC states as well as 12 non-EC producers are affected. The tariff for British steel amounts to 109 per cent.

Sir Leon Brittan, the EC commissioner for external economic affairs, said he was checking that the Gatt rules had been properly respected 'both in procedural and substantive terms'.

The Community is especially concerned that the subsidies have been unfairly calculated - particularly in terms of companies subsequently privatised or state aid and equity infusions.

Fiat yesterday denied reports that it was about to announce a large-scale disposal to counter problems in its car business.