WTO Ruling Against Japan

Macdonald Stainsby mstainsby at SPAMtao.ca
Tue Aug 22 18:42:53 MDT 2000

Trade Barriers

GENEVA-A dispute settlement panel of the World Trade Organization today
handed down a sweeping judgement that Japan's traffic laws constitute a
barrier to trade and must be changed.

The judgement is considered a major victory for North American and
European auto producers, who argued before the WTO that Japan's
requirement that vehicles drive on the left side of the road established
an unfair barrier to imports of cars and trucks.

As one auto industry lobbyist explained, "The Japanese government
literally forces its citizens to drive on the wrong side of the road.
It's the major reason why they don't buy our left-hand-drive vehicles."

The WTO panel is similar to those that forced Canada to abolish the Auto
Pact, its pharmaceutical patent laws, its domestic magazine policy, an
aerospace technology program, and several agricultural marketing boards.

The Japanese government must now enter into negotiations with other
countries to determine a timetable for reforming its traffic laws. A WTO
official, who wished to remain both nameless and faceless, stressed that
Japan would be given a "reasonable period of time" to phase in
right-side-of-the-road traffic rules.

"We're not heartless," said the official. "We're not going to force them
to make this change overnight." A transition period of up to 18 months
will be permitted, during which Japanese drivers will gradually begin to
drive on the right.

Sales of imported vehicles in Japan are expected to enjoy an immediate
boost as a result of the WTO decision. Large North American sport utility
vehicles, such as the Dodge Durango and the Lincoln Navigator, will
likely experience the greatest increases in market penetration thanks to
their enhanced ability to withstand head-on collisions. The tank-like
General Motors Hummer is expected to be particularly popular during the
transition period.

Canada's Trade Minister Pierre Pettigrew immediately hailed the WTO's
decision as "a victory for free trade." When asked about the expense of
forcing an entire country to drive on the opposite side of the road,
Pettigrew pointed to the long-run efficiency gains that theoretically
should result from free trade.

"Sure, there will be short-run adjustment costs," Pettigrew admitted,
referring to the temporary incidence of head-on crashes and other
problems. "But in the long-run, the Japanese will thank us for this. They
can now stop driving on the wrong side of the road, and start to focus
their skills and resources in those industries where they are more

Emboldened by the WTO decision, foreign automakers plan to launch other
complaints about Japanese trade practices. Sources within the industry
hint that the next WTO challenge may target the unfair use of the
Japanese language.

"Japanese customers can hardly make sense of North American owner's
manuals," complained one Detroit-based auto analyst. "They're much less
likely to buy a vehicle when they can't figure out how to make it work."

It is widely expected that Japan will resist WTO demands to abolish the
Japanese language by claiming a cultural exemption to normal trade rules.
But the WTO official scoffed at that prospect. "There's even less genuine
cultural value to a Japanese-language owner's manual than there is in the
Canadian edition of Reader's Digest," he said.

Meanwhile, officials in China's trade ministry expressed pleasure with
the WTO decision, suggesting that it enhances the likelihood that China
will be admitted to the world trading club within the next year or two.

"Sure, our country is still nominally run by Communists," said the
official. "But we drive on the right side of the road. This clearly
indicates our readiness to accept the discipline of world market forces."

The implications of the WTO ruling on traffic laws may even extend to
completely separate industries. An association representing U.S. beef
growers, for example, is already discussing plans to launch a trade
challenge against the Japanese sushi industry, based on the precedent
created by the traffic law case.

"Japanese consumers are indoctrinated to eat raw fish from the time they
are toddlers. No wonder they won't buy our meat," complained one beef
lobbyist. "That's completely unacceptable." The beef challenge may be
backed by powerful support from the pharmaceutical industry, which has
long complained of a lack of demand in Japan for U.S.-made
cholesterol-reduction drugs.

This latest decision represents another expansion in the scope and
breadth of the WTO's dispute-settlement system. What was initially
intended as a means of arbitrating relatively narrow and arcane questions
of trade law, has evolved into an authority with the mandate to challenge
any law, policy, or practice found to inhibit the preeminent goal of
expanded world trade.

The worldwide economic and cultural harmonization thus being encouraged
by the dispute-settlement mechanism is a normal side-effect of
globalization, explained a top U.S. trade official assigned to the WTO.
"Basically, it won't stop until foreigners finally start to think like
Americans, act like Americans, and-most of all-shop like Americans."

When not reporting on WTO decisions from Geneva, Jim Stanford is an
economist with the Canadian Auto Workers.


Macdonald Stainsby.

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