Us, Japan Head For New Market Row

The officials were speaking after a first round of WTO consultations on the issue, linked to but separate from the so-called Kodak-Fuji case over what the US says is a rigged market in Japan to keep out foreign photo film.

I dont see the Japanese climbing down easily over a set of laws that have been so carefully constructed over a long period of time, said one US trade official.

I think the US does not really understand the purpose of our laws. It will be difficult to persuade them, said a Tokyo trade envoy.

Both sides left little doubt they expected that after the two days of talks, the issue would move on to the WTOs Dispute Settlement Body and creation early next year of a neutral panel to study the arguments and adjudicate.

 

That would be the second panel in a wide-ranging dispute between the two major trade powers, sparked by complaints from the US Eastman Kodak Co firm that Japan fixed its market to favour the domestic Fuji film firm.

Creation of the first panel, which will rule by next spring on whether Japan was violating WTO accords on non-discriminatory trade in goods, was agreed at the DSB on October 16 after US-Japanese consultations failed to resolve the issue. The second complaint is being brought by the US under the WTOs basic agreement on trade in services, the GATS.

In the pipeline is a third on the terms of which the two powers are squabbling over alleged restrictive business practices in Japan affecting the photo film trade.

Kodak, which holds 70 per cent of the domestic US market but only 10 per cent in Japan, argues that successive Tokyo governments have set up a network of rules and regulations designed to keep its market share down.

Kodak, which has 36 per cent of the world market for photo film and paper against Fujis 33 per cent, says these practices have deprived it of a potential $5,6 billion in revenues over the past decade.

But Japanese officials and Fuji representatives deny discrimination and point to the fact that their company has only a 12 per cent share of the US market while also holding around 70 per cent at home.

In the second dispute, US trade negotiators argue that Japans large-scale retail store law, which sets the terms on how big chains can set up outlets and how they can operate, is the second link in a chain working against Kodak.

With the access to small shops limited by rigged control of the distribution chain, the next best outlet for American goods is the big retail stores. But the law and several other measures limits their operations, we think deliberately, said a US official.