December 1, 2017 2:14 am JST

Japan to skip punitive duties on US goods

Tokyo seeks to avoid fresh friction with Trump administration

Prime Minister Shinzo Abe speaks in a news conference in Tokyo on Nov. 6 with U.S. President Donald Trump

TOKYO -- Japan will hold off on imposing retaliatory tariffs on U.S. bearings and other products that have met trigger conditions, likely in hopes of avoiding provoking an American president keen on addressing trade imbalances.

The Japanese Finance Ministry will notify the World Trade Organization of its decision as early as Friday. The matter concerns U.S. anti-dumping legislation known as the Byrd Amendment, under which the U.S. collected duties on cheap steel imports deemed unfairly priced, until the law's repeal in 2006.

The U.S. still uses those previously collected duties for subsidizing companies affected by cheap foreign products. The WTO sees such double protection of domestic industry -- via penalizing foreign rivals and helping domestic peers -- as a violation of its trade rules and allows affected countries to retaliate with tariffs.

Japan did not implement retaliatory duties between 2014 and 2016 because the subsidies were minimal at tens of thousands of dollars.

But for the fiscal year ended in September 2016, the subsidies surged to around $85 million, the highest since 2005 when Japan first introduced retaliatory duties. The main beneficiary of the U.S. subsidies are bearing companies, which supply automakers and other manufacturers.

Yet Japan will not take any retaliatory action again this time as it is loath to cause friction with a U.S. government headed by a protectionist president. Donald Trump complained about the U.S. trade deficit with Japan when he met with Prime Minister Shinzo Abe in November. If Japan hits back, the U.S. could amp up its demands on specific items like automobiles and beef, among others, as well as step up calls for a bilateral free trade pact, a Japanese government source said.

And triggering retaliatory duties could backfire on Japan. Many Japanese bearing companies set up shop in the U.S. when the yen was strong, and now ship products back to Japan.

Meanwhile, Japan risks being perceived as condoning trade rule violations, undermining its own stance of promoting free trade. The European Union in May imposed retaliatory duties on women's denim jeans from the U.S. based on WTO rules.

Japan's emergency safeguards on beef imports went into force automatically in August. But the government has some leeway in imposing retaliatory duties and can make decisions on a case-by-case basis. What is needed now appears to be greater transparency in the decision-making process.

(Nikkei)

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