The biggest victim of a leather products trade dispute between Japan and the European Union may turn out to be the hisabetsu buraku — the ostracized hamlets where many of Japan’s social outcasts earn a living tanning leather.

The 15-nation EU filed a complaint with the World Trade Organization earlier this month over Japan’s leather-import restrictions. The so-called tariff-quota system protects the weak domestic leather industry from foreign competition.

The system allows Japan to put quotas on imported products that are subject to relatively low tariff rates. Imports that exceed those quotas face prohibitively high tariffs, and as a result lose much of their competitiveness in the lucrative Japanese market.

The leather-trade row surfaced at the end of 1996, when the union’s executive arm — the European Commission — was apparently prodded by such major leather exporters as France, Italy and Spain to press Japan on boosting European imports by modifying the tariff-quota system.

The Japanese government subsidizes leather tanners, many of whom belong to Japan’s largest minority group — the burakumin — a people who were legally discriminated against in the Edo period because they worked with dead animals and were thus thought defiled. Estimated to number around 3 million, the burakumin today remain social outcasts and live in separate communities away from other Japanese.

The EU insists those subsidies, as well as Japan’s “opaque” operation of the tariff-quota system, could be violating rules set by the WTO, the Geneva-based watchdog on international commerce.

The EU filed a complaint with the WTO on Oct. 9 and asked Japan to hold “bilateral consultations” sometime in the second half of next month, in line with the first stage of the WTO’s dispute-settlement procedure. Japan agreed 10 days later.

If the bilateral consultations fail to produce a settlement within 60 days of the complaint being filed — or by early December in this case — the union can request the establishment of a neutral, WTO dispute-settlement panel to make a ruling on the case, within nine months in principle.

At the moment, it is unclear if the EU is determined to go so far as requesting a WTO panel to adjudicate the leather case.

“It is still possible that the two sides will reach a settlement to the case within the next few weeks, resulting in the canceling of bilateral consultations they agreed to hold sometime in the second half of next month,” a Japanese trade negotiator said.

Indeed, Sir Leon Brittan, vice president of the European Commission, agreed with Kaoru Yosano, the minister of international trade and industry, during a meeting in Tokyo earlier this month that the EU and Japan should continue to settle the leather case bilaterally, outside the WTO framework. The meeting was held only a few days after the EU filed its complaint with the WTO.

“Even if a WTO panel is set up at the EU’s request, it is inconceivable that the panel’s decision will require Japan to abolish the tariff-quota system itself,” a senior official at the Ministry of International Trade and Industry said.

The MITI official conceded, however, that there is “a good possibility” the subsidies to domestic tanners will be judged a violation of the WTO subsidy code, which prohibit any government from doling out subsidies greater than five percent of the value of the disputed country’s domestic output.

The Management and Coordination Agency has for several decades earmarked funds for economic and social development projects for tens of hundreds of hisabetsu buraku to boost the living standards of the burakumin.

But the agency might be forced to modify its assistance policy toward the socially segregated communities if a WTO panel rules that leather-tanning subsidies violate the WTO subsidy code, government sources said.

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