US and Japan stumble towards trade war

G7 summit: Row over cars threatens agenda

Japanese prime ministers are rarely conspicuous for their performances on the international stage, but few have gone into a summit with such low expectations as Tomiichi Murayama.

The G7 summit begins in Halifax, Canada, with tensions between Japan and the United States higher than for several years. But the Japanese Prime Minister goes to a private meeting with Bill Clinton today with little hope that their multi- billion dollar trade dispute will be resolved, or even alluded to.

Relations between the US and Mr Murayama's year-old government have been at an all-time low since the Americans last month announced 100 per cent tariffs on 13 Japanese luxury cars. The sanctions, worth $5.9bn (pounds 3.8bn) annually and backdated to 20 May, come into effect on 28 June unless Japan agrees to import more American auto parts. Since talks broke down last month, the issue has dominated relations between the two countries.

Talks in Geneva ended inconclusively on Monday; they restart next week, and both have appealed independently to the World Trade Organisation. Officials in Washington freely admit it will take "a miracle" for a deal to prevent the tariffs being imposed as planned.Indeed, far from retreating in the face of Japanese resistance and criticism from most European countries, US negotiators have hardened their stance, warning the quarrel could spill into other areas - a barely veiled suggestion that Washington might rethink defence and security agreements with its former Second World War foe.

The upshot is a row that is fast turning into the most menacing disagreement between the world's two largest economies since 1945. Warren Christopher, Secretary of State, has scheduled an "emergency" meeting with his Japanese counterpart, Yohei Kono, on the eve of the Halifax gathering to try to defuse tensions.

Old war wounds have been reopened by the row over a Washington exhibit commemorating the atomic bombs that destroyed Hiroshima and Nagasaki, and by Japan's latest mealy- mouthed "apology" for its responsibility for the conflict. Tokyo has delivered a snub by refusing to join the US embargo against Iran.

The Japanese appear to be under the illusion that these disputes will be politely ignored at Halifax. "Fundamentally, this year's summit will not be very different from Naples," a Foreign Ministry official said.

Mr Murayama missed much of that summit last year after unfamiliar food made him ill. Assuming he can keep down his lunch in Canada, he will talk about disarmament and nuclear proliferation, employment, and - in the light of the gas attack on the Tokyo subway - global measures against international terrorism.

He will also emphasise Japan's efforts to increase its imports and stimulate its sluggish economy.

But officials have made it clear bilateral trade is off the agenda, despite growing fears of a trade war if a settlement is not reached in the next fortnight.

Both sides are going out of their way to prevent bitterness about the dispute souring other diplomatic areas. "I have confirmed with President Clinton that we share the view that this bilateral issue should not be allowed to disrupt overall relations," Mr Murayama said yesterday.

But many privately suspect such "ring-fencing" will be impossible. "Emotions are running high," said one Western diplomat in Tokyo this week. "If the Americans want unilateral action, against Iran or against North Korea, the people they talk to in Tokyo are going to be less happy to hear from them."

News analysis, page 13