Asia Times: China hits Japan where it hurts


	June 26, 2001	atimes.com

Japan

China hits Japan where it hurts
By Suvendrini Kakuchi

TOKYO - A decision by China to slap 100 percent import tariffs as of this past Friday on a number of Japanese-made products has hit Tokyo's pride and put officials in a quandary as to how to best resolve the escalating trade war with its most important Asian trading partner.

"The Chinese decision is regrettable and should be retracted immediately," Japanese Trade and Industry Minister Takeo Hiranuma said in a statement. Japanese businessmen who have sunk millions of dollars in China, taking advantage of its abundant cheap labor and close proximity to Japan, are calling for a quick solution to the trade row.

Beijing's latest move was in retaliation to Japan's decision in April to impose temporary curbs on Chinese agricultural products - mushrooms, leeks and rushes used for straw mats - in the form of import tariffs of up to 266 percent. Failing to get Tokyo to lift the curbs, China earlier this month announced restrictions on Japanese car imports. And as of Friday, in a move that stung Japan, Beijing said import tariffs will also be slapped on Japanese mobile telephone and airconditioners, in addition to cars.

The State Council of China, in justifying its move, accused the Japanese government of adopting "unfair limits on exports from China".

"Despite vehement opposition by the Chinese government, Japan has imposed unfair trade sanctions and discriminatory treatment toward several Chinese exports and greatly hampered the healthy development of bilateral trade relations," Xinhua news agency quoted the Chinese Foreign Ministry as saying.

Japan lodged a strong protest and demanded Beijing immediately rescind the measure. "We hope the Japanese government will end the dispute as quickly as possible," says Tomoichi Shirokawa, head of Sino Imports, a textile wholesaler that relies on China for 80 percent of its textile supplies.

"The selection of products represents Japan's most prestigious technological products and thus represents a huge psychological blow to national pride," says Ryoju Ishhii, a political writer.

He adds that Beijing took the step to also express its anger at several other contentious bilateral issues such the recent row over Japan's acceptance of history school text books that gloss over its war-time atrocities and Tokyo's decision to issue a visa to former Taiwanese president Leen Teng-hui to visit for medical treatment.

Ruan Wei, an analyst at the Norinchukin Research Institute, a private think tank, says the current dispute is a new landmark in Japan-Asia relations. "While I think the tension will not spill over to the rest of Asia, there is now doubt that China's displeasure is a test for prospective trade spats and Japan's ability to enact structural reform and help boost imports from Asia," she said.

Small and medium-sized Japanese companies have been heavily investing in Asia, a move that has brought important technology and machinery to the region and helped boost the quality of Asian exports to Japan. China represents Japan's biggest Asian trading partner, but growth of trade between the two has been in China's favor, with Japan currently posting a trade deficit of US$12 billion.

Though China's retaliatory move worsened tensions between the two, the quantitative impact is not considerable. As observers point out, the products chosen by China represent only a fraction of trade between the two partners. For instance, figures compiled for the first four months of the year show that the export of Japanese vehicles to China comprised just 2 percent of the total.

Hiroshi Okuda, chairman of the Japan Automobile Association, while urging China to reverse its decision, also said Beijing's trade curbs on cars is not likely to hurt Japanese automakers as the export of finished vehicles to China is limited.

Tomoo Marukawa, an expert on economic relations between Japan and China at the Tokyo University, predicts Japan will not bow to pressure from China. "I don't see Japan backing away from its temporary safeguard curb on vegetables," he says. The ruling Liberal Democratic Party is dependent on the rural vote that is lobbying hard for protective measures in a bid to survive cheaper Asian exports, he said.

In addition, there is pressure on the Japanese government to be more assertive in its foreign relations, an important consideration ahead of the Upper House elections slated for next month.

But as Marukawa points out, if the trade war with China expands to include more important exports such as auto parts under the new tariff system, then things could get nasty for Japan and pose a cloud over its overall trade relations with the rest of Asia.

(Inter Press Service)

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