RESTRICTED
WORLD TRADE WT/DSB/COM/1
12June1995
ORGANIZATION(95-1548)
Original: English
UNITED STATES 'AUTO AND AUTOPARTS ISSUES: USUNILATERAL MEASURES
Statement byJapan
Thefollowing statement made byJapan attheMeeting oftheDispute Settlement Body on31
May1995 hasbeenreceived from thedelegation ofJapan on2June1995 withtherequest thatitbe
circulated toMembers.
_________________________________________
Before entering intothelegalaspects ofthecase, Iwould liketoexplain totheMembers here
whyJapan requested Article XXII:I consultations withtheUnited States.
Although Iwillnotrepeat indetail Japan'sstatement intheCouncil forTrade inGoods, Iwould
liketounderscore thereason whytheJapan-United States 'negotiations havecome toanimpasse.
Thereason istheUSGovernment 'scontinued insistence ontheexpansion andrenewal oftheparts
purchasing planbytheJapanese automobile manufacturers, andonsetting thefuture target forthe
number ofdealers handling foreign vehicles. Wecould never agree tothenumerical targets approach
nortogovernment intervention intoprivate business activities. TheUSGovernment thenresorted
tounilateral measures. Itwasunder suchcircumstances thatJapan brought thecasetotheWTO. We
areverywellaware thatthenewly established WTO isalready laden withvarious other businesses.
However, wehadnochoice buttobring thecasetotheWTO because thisimpinges onthebasic
principles ofinternational trade, which areembodied intheWTO. Japan hasfullconfidence inthe
WTO, asaplace where trade disputes canbehandled inanimpartial andde-politicized manner.
However, Iwasextremely encouraged bythefactthatourcolleague fromtheUSGovernment,
remarked thattheUSGovernment wasnotasking fornumerical targets, andmade thiscomment in
front ofMembers attheGoods Council Meeting onthe29May. Inthepast,thesenior USofficial
made thesame sortofcomment, butthenafterwards thesame official saidthatrequesting afuture
number ofdealers handling foreign automobiles, forexample, wasnotanumerical target. Wehope
thistimethatremarks made byourcolleague fromtheUSGovernment isnotsucharhetoric weheard
several times inthepast. Today, wewould likeourcolleague from theUSGovernment toclarify
thattheUShaschanged itspolicy, andhasdecided tostoprequesting theexpansion andrenewal of
partspurchasing plans, andtostoprequesting atarget foranumber ofdealers handling foreign vehicles.
Wewould welcome suchaclarification. Iamsurethatthischange oftheUSGovernment 'spolicy
would make iteasier forbothsides toreach aconclusion concerning theautoandautoparts issues.
I. USGovernment Unilateral Measures andWTO Inconsistency
Thelegaldiscussion Iwillmake withregard toUSunilateral measures hererefers tobasic
aspects oftheirinconsistency withtheWTO Agreement.WT/DSB/COM/1
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A. Article IViolation
Withholding ofliquidation isdiscriminatory andtherefore violates Article IofGATT 1994.
Theimposition of100percentduties bytheUS,ifimplemented, willalsoviolate Article IofGATT
1994.
B. Article IIViolation
Theimposition of100percentduties bytheUSexceeds itsbound tariff rateonautomobiles
of2.5percent, andifimplemented, willtherefore violate Article IIofGATT 1994.
C. Article XIandArticle XIIIViolations
Thewithholding ofliquidation inthiscasealsofunctions asadefacto restriction ontrade,
inviolation ofArticle XIofGATT 1994. Since thisrestriction applies onlytoJapan, itisdiscriminatory
andthusalsoviolates Article XIIIofGATT 1994.
D. DSU Article 23Violation
Theaffirmative determination made onMay10thunder section 301,thecurrent withholding
ofliquidationandtheproposedimpositionoftariffsalsoviolateArticle23oftheDSU,whichspecifically
prohibits suchunilateral actions.
E. Nullification andImpairment under Article XXIII:1(b)
Inaddition totheabove, thewithholding ofliquidation inthiscaseisnullifying andimpairing
thebenefit accruing toJapan from2.5percentbound tariffrateonautomobiles under Article XXIII:1(b)
ofGATT 1994.
There havebeenreasonable expectations thattheUStariffs onautomobiles would befixed
at2.5percent. Withholding ofliquidation andthethreat of100percenttariffs undermined these
expectations anddisrupted thecompetitive relationships inluxury carmarkets.
II. Need forTreatment asa"Case ofUrgency"
TheGovernment ofJapan believes thatthissituation represents a"case ofurgency". First,
theGovernment ofJapan strongly believes thatthetwocountries should startconsultations assoon
aspossible, before thesituation worsens withtheimplementation ofadditional retaliatory measures.
There arecurrent WTO violations thatshould beredressed immediately.
Second, ifthissituation cannot beresolved quickly, thedealer networks handling Japanese
luxury carswillbecrippled. Dealers handling Japanese luxury carswillbeforced tofireemployees
andfacebankruptcy. Many maynotsurvive. Without prompt action, theUSGovernment actions
willbring about unrecoverable damage.
Third, iftheWTO cannot quickly resolve thedispute involving clearviolation ofrules, the
credibility oftheWTO itself willsuffer.
HereIwould liketorefertotheactual damage caused byUSmeasures. TheUSGovernment
isclaiming thattheunilateral measures havenotyetbeenimplemented. However, thewithholding
oftariff liquidation hasbeenalready implemented since May20th, andinfactwasannounced with
just4daysnotice before itsactual implementation. Surely theUSGovernment knows thatittakesWT/DSB/COM/1
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about twoweeks ontheaverage forocean shipments toarrive fromJapan, andthisannouncement would
thereforeaffectshipmentsalreadyonthewater.ThismeasurehasforcedJapaneseautomobilecompanies
tochange thedestination oftheautomobiles already onboard ships when possible, andtostopthe
shipments ofcarswhich wereabout tobeshipped. Sofarthisdamage alone amounts to9.2billion
yen(approximately 108million dollars). Moreover, thecompanies alsohadtodecide tostop8.1billion
yen(approximately 93million dollars) worth ofproduction ofluxury automobiles forexport tothe
USmarket. Asisclear from these facts, themarket distortion isalready areality.
TheUSGovernment seems tohavedecided theamount oftheunilateral punitive tariffmeasure
based onitsalleged unfairness oftheJapanese market, without revealing anybasis foritsUS$5.9
billion asareasonable magnitude ofdamages. Thislackoftransparency cannever beoverlooked.
TheUSGovernment hasanobligation toexplain andjustify thefigures totheGovernment ofJapan,
aswellastotheparties which were being affected bythemeasures.
TheGovernment ofJapan believes thecaseshould beconsidered asa"case ofurgency". The
Government ofJapan continues topursue itsrequest forurgency andreserves allrights tothiseffect.
TheGovernment ofJapan would liketoconfirm herethat,eveninanormal case, beginning
theconsultations within 30daysisanexplicit obligation ofaMember under theDSU. TheGovernment
ofJapan believes consultations should begin assoonaspossible, butcertainly nolaterthan30days,
i.e.,byJune15th. TheGovernment ofJapan alsobelieves theyshould beheldinGeneva.
Supplementary Statement ontheRecent Automobile Import Market Situation inJapan
Thenumber ofautomobiles imported fromabroad hasincreased bynearly 42percentinthe
first4months from January toApril intheyearof1995 compared withthecorresponding period of
theprevious year1994.
IfImayquote aspecific model, thenumber ofChrysler 'sCherokee imported intoJapan has
increased tentimes asmany between 1992 and1994, whereas thetotalautomobile market inJapan
hasbeendiminished by8percentforthecorresponding period. HereChrysler hasresponded tothe
Japanese consumers 'taste(e.g., introduction oftherighthanddrive model).