**The agreement aims at opening three sectors of the Japanese market — government procurement of telecommunications and medical equipment, insurance and flat glass. Mentionably, it does not cover autos and auto parts which account for 5ft per cent of the $60 billion US annual trade deficit with Japan.***

THERE Is no last word in politics, they say But then, why confine the precept to politics alone? As the latest saga of trade dispute between the United States and Japan amply demonstrates, the maxim applies equally well to commerce also. An accord which averted the Immediate possibility of US trade sanctions against Japan was reached between the two countries In the early hours of Saturday. October 1. The agreement came at the end of a final 20-hour marathon session. lasting beyond the September 30 midnight dead line set by the United States. Yet. on the same Saturday that the pact was signed in Washington, the United States announced at noon that it was Initiating a process under its trade lawg that could bring sanctions against Japan In a matter of one year or so! Trade dispute between the two countries has only entered a new phase. No last word has been spoken yet.

The latest round of US-Japan trade talks owes its ori gin to the so-called framework agreement, concluded between the two countries in July last year In Tokyo. The two sides were there on the occasion of the annual summit of the Group of Seven leading Industrial nations. The frame work agreement was primarily designed to establish a mech anism for reducing Japan's trade surplus with the United States. The accord called for negotiations for enlarging the access of US goods in the Japanese market. It sought to establish negotiating ground rules for resolving the differences in approach that have characterised the fractious US-Japan trade relations for over two decades.

More to the point, the framework accord spoke of setting objective criteria for gauging the progress made in

the opening of the Japanese market and for assessing the results of measures adopted to reduce the US trade deficit Since then, the two sides had been arguing about what they had precisely agreed upon in Tokyo last year. Specifically the term objective criteria defied definition. Each side put up its own interpretation without seeming to agree what these objective criteria would precisely be. Analysts say that even after 15 months of off and-on negotiations, leading up to the October 1 Washington accord, this area still remains vague and ambiguous

The United States had all along insisted on a result-ort ented approach tn dealing with the trade issues. For achieving measurable results In reducing Its trade deficit and In selling more of its goods on the Japanese market. It talked about numerical targets In other words, Japan's trade surplus should be scaled down every year by a certain per centage of Its GNP and so policy measure In this area would be designed to attain this result. Likewise, exports of specified US goods to Japan every year would have to increase by an agreed percentage and a mechanism would be put in place to strike the mark.

To go by the Japanese off! cial utterances as could be , gleaned from media reports, the Idea of linking the movement of trade surplus to GNP was not totally unacceptable. However, regulating the volume of external trade in specified Items, so as to increase . their Imports from a targeted source, was a different matter altogether. Such a measure, it was argued, would entail governmental control on the mar

ket Traders would have to be told to Increase their imports of a specified Item from a par tlcular country or reduce export of another listed merchandise to the same destination This would amount to practicing managed trade. It was said, a concept which clearly violated principles of open economy.

The upshot was. trade talks between the two countries broke off in February this year. There followed an Interregnum of neaijy three months of acrimonious trans-Pacific de bate, spiced with aggressive posturing by both sides, but

mostly from the Americans. Talks of US trade sanctions against Japan were very much In the air. United States revived the lapsed so-called Super 301 provision of its trade laws in March. Super 301 Is generally seen as a powerful tool to aid the pursuit of an aggressive policy to open foreign markets for American goods. It enables the US administration to cite priority countries' indulging In. what It regards as unfair trade practices, the elimination of which held the most significant potential for increasing American exports. Such a priority country would be named by a specified date and then would follow an investigation which would include fact-finding, consultation with domestic industries which have been hurt and also talks with the foreign

government concerned The process could last up to 18 months but if at the end of it all. the offending trading part ner country does not come to terms, the United States could impose retaliatory measures unilaterally under Its own trade laws.

Revival of Super 301 which had lapsed in 1990. drew ad verse notice both from Europe and Asia. The US move came at a time when, after more than seven years of arduous and often acrimonious negotiations. the Uruguay Round global trade pact reached under the aegis of the Genera)

Agreement on Tariffs and Trade (GATT) was due to be signed in April. The signal for aggressive unilateralism, coming from the United States at this Juncture, caused widespread concerto if not consternation. There were talks of Japan taking its case to the GATT if the United States Initiated trade retaliatory mea sures unilaterally.

Talks of trade war also upset the global financial mar ket. The currency market seems to be headed for a new phase of volatility, particularly in respect of conversion rates between the US dollar and the Japanese yen. The market perception seemed to be that the dollar would be allowed to slide down continuously against the yen. A weak dollar would make American goods < heaper and hence more com-

petltlve on the global market and in Japan. At the same time a strong yen would cost importers of the Japanese goods more and thus erode Japan's export competitiveness The dollar did fall to lowest post-World War II levels against the yen. sliding below 100 yens to a dollar The trend, if It continued, could trigger widespread movements of global funds, destabilizing financial markets the world over. .

Anyway, trade talks between the United States and Japan were resumed In May but again got stalled. Japan had been arguing that Its Import market was not really closed. It was pointed out that Japan s Imports of $241 billion of goo8s in 1993 made It the second largest Importing nation In the world on a per capita basis, excluding Intra-regional trade, after Germany. It was also argued that Japan’s average tariff rate on manufactured and mining products was 2.2 per ' cent, compared to 5.4 per cent in the United States and 5.7 per cent for the European Union. The other side was not impressed and talked of non tariff barriers and Japan's unique system of which has the effect limiting Imports. Japan also spoke, albeit rather vaguely, of introducing longterm tax cuts to encourage the Japanese consumers buy more foreign products with their higher disposable Incomes — the market thus Increasing Imports on its own. The other side refused to be swayed by such promises, still Insisting on measurable market-opening actions within a given time frame. Meanwhile, the final deadline of September 30 was approaching fast. This deadline

emanates from the revived Super 301 requirement that the so-called priority country be named by September 30. 1994

The trade pact that was signed after 15 months of strenuous efforts, is now being regarded as only a partial ac cord The agreement aims at opening three sectors of the Japanese market — govern ment procurement of ic!e% communications and medicfl* equipment Insurance and flat glass Mentionably. it does not cover autos and auto parts which account for 59 per cent of the $60 billion US annual trade deficit with Japan. On the question of setting down criteria for measuring results, analysts generally say that the terms of the accord remain ambiguous — leaving both skies to claim victory. By all ac counts, numerical targets will not be there. All the same, a variety a objective criteria would be used to measure Improvements in market open Ing. These include such yard sticks as trends in sales, mar ket shares in government procurement. processing time for according permission for Introducing new insurance products. Results will not be predetermined but progress will be monitored closely

As noted at the outset, the United States has Initiated proceedings under its trade laws In one sector already which could end up in retaliatory action against Japan.

Understandably, the sector chosen for this action is auto parts. It Is reported that Japan has since been put on a trade watch list for possible retaliatory measures if It does not open its wood and paper markets further. Implementation of the accord signed earlier will also give rise to differing interpretations. All in all. more fireworks are perhaps in the offing.