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TheStreet Open House

WTO Members Set to Butt Heads Over Trade

TOKYO -- U.S. President Bill Clinton will have his hands full this week as thousands of protesters representing labor organizations, environmental groups and farmers converge on Seattle to assail World Trade Organization, or WTO, delegates who will be attempting to launch another round of trade talks intended to further open markets around the world.

Worse yet for Clinton, the trade officials representing the 134 WTO countries are fighting like alley cats among themselves. Last week, they gave up attempts in Geneva to agree on an agenda in Seattle and to draft a ministerial declaration necessary to get the so-called Millennial Round going.

One of Clinton's biggest headaches is Japan. Tokyo loves the WTO because it feels it can use the multilateral regime to undercut Washington's attempts to use its trade laws unilaterally to punish Japan with sanctions and to pry open its markets.

The list of issues that divides the two capitals is big enough to choke a horse and includes disputes over how to handle labor, investment and antitrust policies in the new round. But the two biggest points of departure involve Japanese protection of its farmers and American antidumping laws.

The bilateral beef over agriculture hinges on the mind-bending term "multifunctionality." Japan wants the WTO to give special treatment to farm products, arguing agriculture plays a central role in conserving the environment, ensuring food security and safeguarding the livelihood of farmers. Tokyo believes these multiple factors -- and not just economic issues -- should be considered during future WTO negotiations to liberalize agricultural markets.

For years, Japan's Ministry of Agriculture has been working overtime at home to build a consensus around multifunctionality. Not alone, the European Union and the developing countries have backed Tokyo on this concept.

The U.S. sees multifunctionality as yet another protectionist ploy and is refusing to let it see the light of day in Seattle. Ultimately, Washington wants agricultural products to be treated more or less like manufactured goods within the WTO, which would eventually entail significant reductions in tariffs and subsidies for Japanese farmers.

Fortunately for Clinton -- and unfortunately for Japan -- the EU is showing signs of softening. A month ago, it stopped using the term multifunctionality, apparently opting instead to accept considering merely "nontrade concerns" (already agreed in the Uruguay Round) for negotiating agricultural liberalization in the coming trade round.

Given that the Japanese and the developing countries seem to be the only full-blown proponents of multifunctionality, they'll have a tough time in Seattle. Prime Minister Keizo Obuchi and his ruling Liberal Democratic Party, which enjoy big voter support from the farm lobby and have a lower house election on the horizon, are desperate to find a compromise.

The other big bilateral bone of contention is over U.S. antidumping laws, which Washington uses to impose tariffs on imported goods when it determines they are being sold below cost in the U.S. market and are causing injury to domestic industry.

Tokyo wants the new trade round to take up proposals to make it more difficult for the U.S. to use its antidumping legislation against Japanese exporters. In June, for example, the International Trade Commission in Washington, D.C., ruled that Japanese steelmakers have been dumping hot-rolled steel in the U.S. and slapped punitive duties of up to 67% on them. In a carefully orchestrated move timed to influence the talks this week, Tokyo recently filed a complaint with the WTO saying the action was unfair.

Again, Tokyo is fighting an uphill battle. The antidumping lobby in Washington, led by American steelmakers, exerts considerable political influence. It came as no surprise when U.S. Secretary of Commerce William Daley declared in an op-ed piece in last Monday's Financial Times that "one of the highest U.S. priorities for Seattle ... is maintaining strong U.S. trade laws that prevent dumping and subsidized imports from throwing Americans out of work." Moreover, the Europeans, which have their own antidumping regimes, are basically with the U.S. on this issue.

The word around Tokyo is that Japanese Foreign Minister Yohei Kono and the delegation he's leading to Seattle dread the talks. Apparently more isolated on agriculture and facing stiff U.S. resistance on antidumping, it's likely they'll have some explaining to do when they return home.

In the run-up to Seattle, there's been lots of talk that the nasty bickering between Japan, the U.S. and the other WTO members will result in an aborted launch of the Millennial Round. Will this happen? Probably not. The negotiators in Seattle know that in 1982 efforts to begin the Uruguay Round collapsed and that it took four years to finally get those talks started.

Keep in mind, the Millennial Round won't just be about agriculture and antidumping. It's also intended to achieve greater liberalization in a myriad other important areas, including industrial goods and financial services. The delegates also want to renew the no-tariff moratorium on e-commerce.

John F. Neuffer, a longtime observer of Japanese politics, is an analyst at Mitsui Kaijyo Research Institute (MKR). He writes biweekly commentary for TSC and publishes an in-depth roundup of Japanese politics on his Website, behindthescreen.com . The views expressed above are those of Neuffer and not necessarily those of MKR. This column is exclusive to TheStreet.com.

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