Upping the ante in its rankling, tit-for-tat trade war with China, the government could soon begin procedures to formalize emergency import restrictions on three Chinese farm products, government sources said Wednesday.
The decision whether to do so will likely come in September, and the formal restrictions would likely take effect in November and remain for two years.
The sources said, however, that Japan will continue to pursue a settlement through negotiations before the current 200-day preliminary “safeguard” restrictions expire on Nov. 8.
They also said that the Ministry of Agriculture, Forestry and Fisheries has already compiled a report recommending formalizing the restrictions in early November if no settlement is negotiated before then.
A final decision will be made after consultations among the farm ministry, the Ministry of Finance and the Ministry of Economy, Trade and Industry, the sources said. The farm ministry’s report, which is being kept confidential, will serve as a basis for consultations among the ministries.
On April 23, Japan imposed the emergency import restrictions on stone leeks, shiitake mushrooms and tatami straw — the bulk of which was coming from China — to shield domestic farmers.
On June 22, China retaliated by slapping 100 percent tariffs on three industrial goods — automobiles, mobile phones and air conditioners.
Although high-level officials met in Beijing in early July to try to resolve the spat, the negotiations collapsed as neither side gave a hint of compromise.
What’s more, both governments have fiercely accused the other of violating bylaws set by the World Trade Organization, the Geneva-based watchdog for global commerce. Although China has not yet entered the WTO, it has been sitting on the doorstep. China is the world’s seventh largest economy in terms of gross domestic product. Japan is No. 2, behind the U.S.
It remains to be seen whether China will agree to take measures that Japan would consider effective in voluntarily restricting Japan-bound exports of the three agricultural products before Nov. 8.
Before Japan imposed the preliminary restrictions, China offered to try to have each country’s industries come to an agreement over the issue.
But Japan rejected the Chinese proposal and moved to impose the import ceilings on a preliminary basis. Japan believes that any agreement between the two countries’ industries alone would be ineffective in curbing the influx of the leeks, mushrooms and rushes.
Indeed, Chinese exports of rushes to Japan continued to surge until the safeguard was imposed, despite an earlier agreement between the two industries to curb Japan-bound shipments.
If the two countries fail to negotiate a settlement, both are likely to file complaints with the WTO early next year. By that time, China is expected to have been admitted to the body.
It is also possible that if no settlement is reached, China will further escalate the rift by expanding the coverage of industrial goods that face punitive tariffs.
Further complicating the trade dispute is the rapid deterioration of relations between the two Asian neighbors over other prickly issues, including Prime Minister Junichiro Koizumi’s controversial plan to visit Yasukuni Shrine on Aug. 15 and a diplomatic tussle over a right-leaning history textbook for junior high schools.
Aug. 15 is the anniversary of Japan’s World War II surrender, and the Shinto shrine in Tokyo is dedicated to Japanese war dead, including former Prime Minister Hideki Tojo and other Class-A war criminals.
China says the textbook glosses over Japan’s wartime atrocities.
These political issues are likely to make it even more difficult for the Chinese government to budge on the trade row; doing so would risk inviting criticism from domestic hardline conservatives and an already furious public.
Under the current preliminary safeguard imposition, Chinese and other foreign countries’ stone leeks, shiitake mushrooms and tatami straw face prohibitively high tariffs if their import volumes exceed the average from between 1997 and 1999, a period before the import surge began.
The tit-for-tat trade war between the two Asian neighbors also comes as two-way trade is rising precipitously. Bilateral trade exceeded $80 billion last year.
Like the United States and many other countries, Japan has been flooded by cheaper Chinese goods. Japan posted a trade deficit with China of more than $20 billion last year, the largest Japan has racked up with any nation. The gap could increase further as more and more Japanese companies are shifting their production to China to take advantage of cheaper labor costs.
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