Japan-China Tax Dispute May Go To WTO For Resolution

by Mary Swire, Tax-News.com, Hong Kong

18 December 2001

The long running conflict over import duties between Japan and China looks as though it may go before the World Trade Organisation's dispute resolution procedure, as diplomats from the two countries once again failed to resolve the problem last week.

The dispute began in April this year, when the Japanese authorities imposed temporary curbs on the importation of Chinese leeks, shiitake mushrooms, and tatami-mat rushes. The Chinese government was quick to respond to this slight, and in early June, imposed a 100% import tariff on Japanese cars, air conditioning units, and mobile phones.

However, the curbs expired on November 8th, and Japan has until the end of this week to decide whether to impose full sanctions, for which it must submit detailed proof of China's infringement of trade rules to the WTO.

Although the two sides seem to have had problems agreeing on even the venue for talks during this dispute, and the Chinese Foreign Trade Minister, Shi Guangsheng vowed last week to 'fight the dispute to the end', many believe that neither party really wants the trade conflict to end up in front of the World Trade Organisation, especially not so soon after China's accession to the international body.

Speaking to the South China Morning Post at the weekend, an un-named diplomat described the prevailing mood: 'Japan does not want to be the first country to take China to the WTO. It is China's biggest trading partner, after the United States, and next year is the 30th anniversary of bilateral relations,' he explained, adding: 'It is not worth going to the WTO for leeks, mushrooms, and tatami mats.'

However, it is believed that if the WTO was forced to rule on the situation, Japan would emerge victorious, as the value of the Chinese counter-measures is more than three times greater than the taxes imposed by Tokyo in April.

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