US stands by tariff threats as summit looms

PAUL WALLACE

Economics Editor

The US has maintained the pressure in its trade dispute with Japan only days ahead of the economic summit in Halifax, Nova Scotia.

Mickey Kantor, the US Trade Representative, said: "We're not going to blink. If we have no agreement on 28 June, those sanctions are going into effect - no ifs and buts."

Mr Kantor's remarks, made in a television interview over the weekend, cast a pall over the talks, opening today in Geneva at the World Trade Organisation. They make it more likely than ever that the dispute will - together with disagreements over Bosnia - overshadow the economic summit.

The trade dispute is souring American relations not just with Japan but also with the European Union, which is angry with the US for blocking an attempt to participate in today's talks.

The European Trade Commissioner, Sir Leon Brittan, told the Independent yesterday: "We want the Japanese market to become more open, but disapprove of the US methods of going about it. We think what the Americans are doing is illegal and undermines the World Trade Organisation".

He maintained that the tactics pursued by the European Union in negotiations in Tokyo last week had already achieved "substantial progress on the regulatory obstacles" impeding access to the Japanese car and car parts market.

The US is threatening to impose 100 per cent tariffs on imports of luxury cars from Japan backdated by a month if the Japanese do not comply with American demands to open up their car and car parts market.

While the US is likely to come under intense pressure from European leaders to cool its disputes at the summit, few are betting on a positive outcome. The US Fnance Minister, Robert Rubin, has backed Mr Kantor's tactics in the belief that Japan needs to open its markets for its own good - with a little help from its friends.

Other issues to be resolved at the summit include disagreements among the Group of Seven leading countries over recommendations for reforming the UN. These form part of its decision at last year's summit in Naples to shake up international institutions.

It is clear from the draft communique that some within the G7 are demanding far-reaching cuts that will be ferociously resisted by developing countries in the UN. The UK will be seeking agreement from other G7 members for its proposal to sell some of the International Monetary Fund gold reserves of $40bn to provide resources for dealing with the onerous debts of the world's poorest countries to multilateral institutions like the IMF and the World Bank.