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Staff writer

Japan will almost certainly ask the World Trade Organization in November to set up a neutral dispute-settlement panel to adjudicate its auto-trade row with Canada, government sources said Tuesday.

If the request is filed with the WTO’s Dispute-Settlement Body in November — as currently planned — the panel will be automatically established under WTO rules and by the end of the year at the latest, the sources said.

The WTO is a Geneva-based watchdog on international commerce that succeeded the General Agreement on Tariffs and Trade in January 1995.

The sources said that the WTO panel would hand down a ruling, within nine months in principle, on whether Ottawa is giving discriminatory treatment to auto imports from Japan, as claimed by Tokyo, the sources said.

The losing side would be allowed to appeal the panel’s ruling to the Appellate Body, the WTO’s highest court. The Appellate Body would then hand down a final judgment on the case within two months, in principle, of the appeal being filed. But it is quite rare for the body to overturn a ruling by the panel.

Japan filed a complaint with the WTO in July over the matter, accusing Ottawa of violating international trade rules, especially the “most-favored-nation” principle, by denying most Japanese-made vehicles an import tariff-free status granted to some other foreign-made vehicles.

It marked the first time that Japan had taken any bilateral-trade dispute with Canada to either the WTO or GATT.

The tariff-free status in question is being granted to only the five-member companies of an auto pact Canada clinched with the United States when the two neighbors concluded a free-trade agreement nearly a decade ago. The five auto makers are the Big 3 of the U.S. — General Motors Corp., Ford Motor Co. and Chrysler Corp. — and Volvo Car Corp. of Sweden and Suzuki Motor Corp. of Japan.

While the three U.S. auto makers export, tariff free, a total of about 5,000 vehicles assembled outside their home country to Canada annually, their Japanese rivals, with the exception of Suzuki, annually ship a total of about 100,000 vehicles to Canada, which are subject to a 6.7-percent import tariff.

The sources said, however, that although the two governments are now preparing to hold bilateral consultations again in Geneva in the middle of next month, there is almost no possibility that Canada will rectify what Japan considers to be a discriminatory tariff policy anytime soon.

“Canada seems to be just trying to buy time because it does want Japan to request the establishment of a panel to rule on the auto dispute,” said a source at the Ministry of International Trade and Industry. “We have agreed to hold bilateral consultations again next month. But that’s simply to help them save face.

“Japan may notify Canada at the close of next month’s bilateral consultations that it will request the establishment of a panel in November to rule on the auto case.”

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