US and Japan take trade row to OECD

Tensions in the trade row between Japan and the US escalated yesterday as officials on both sides attacked each other's tactics.

Officials from the two countries, in Paris for the annual meeting of the Organisation for Economic Co-operation and Development, publicly criticised each other in the dispute over the auto trade. Tomohiko Kobayashi, Japan's ambassador to the European Union, used a press conference to reject figures on foreign car manufacturers' access to Japanese markets cited by Mickey Kantor, America's trade representative.

Mr Kobayashi said Washington risked souring the two countries' relations, and that the Americans must make the next move.

Mr Kantor replied: "I respect you, we are friends and allies, but you have to get your figures right." He had earlier said the onus was on the Japanese to contact him, saying: "I think the Japanese ministers know my phone number." Both the US and Japanese are using the meeting to lobby for support from the other 23 member countries.

Jean-Claude Paye, OECD Secretary-General, made clear his disapproval of the US threat to impose trade sanctions. Earlier Sir Leon Brittan, the EU's trade commissioner, criticised America's imposition of sanctions on Japanese car imports.

The international tensions cast a pall over one of the key initiatives over the OECD meeting - the launch of a new initiative to bring foreign direct investment into the multilateral trade framework.

The main objective of the agreement, which is expected to take two years to negotiate, is for host governments to treat foreign-owned businesses on the same basis as those domestically owned. The currency turmoil of the last few months - itself an expression in part of the trade tensions between the US and Japan - has taken its toll on the prospects for economic growth says the OECD. Its economists have become more pessimistic about growth and inflation in the developed world in 1995 and 1996.

Last December the OECD predicted growth in real GDP of 3 per cent in 1995 and 2.9 per cent in 1996. These forecasts have been downgraded to 2.7 per cent for each year mainly because of the failure of the Japanese economy to recover with the yen driven so high. The OECD has halved its forecast for Japanese economic growth to 1.3 per cent in 1995 and is predicting a deterioration in the US current account balance as a percentage of GDP and a negligible improvement in the Japanese account.

The outlook for inflation has also worsened. In December the OECD was forecasting inflation of 3 per cent in 1995 and 1996. Now it thinks it will rise to 4.1 per cent in 1995 and 3.7 per cent in 1996. Mr Paye said markets had become more powerful and governments weaker. So policies had to pass the tests set by markets - above all keeping public budgets and debt under control.