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Japan, China reach tariff agreement

China's Foreign Trade Minister Shi Guangsheng, right, holds talks with his Japanese counterpart Takeo Hiranuma in Beijing yesterday. China and Japan ended an eight-month trade row yesterday, the deadline when Tokyo could have moved to impose full sanctions over a dispute sparked by surging imports of some Chinese farm products. PHOTO: REUTERS

Japan and China agreed to scrap punitive tariffs on some of each other's goods, ending an eight-month trade dispute between Asia's two largest economies.

Japanese Trade Minister Takeo Hiranuma and Chinese Foreign Trade Minister Shi Guangsheng met in Beijing yesterday and agreed to end China's 100 percent tariffs on Japanese cars, air conditioners and mobile phones, heading off the threat of Japanese duties on Chinese farm products.

The agreement averts the danger of a wider dispute that could have disrupted about US$85 billion in annual trade between the two countries. Tokyo imposed tariffs on Chinese farm goods after it said the cheaper imports were hurting Japanese farmers. China retaliated with curbs on some Japanese goods.

"China is a fast-growing economy and has the capability to do more damage than just its current safeguards," said Kohei Iwahara, an economist at Commerz Securities (Japan) Ltd. "It's in Japan's best interest to maintain a friendly relationship." The spat started in April, when Tokyo slapped temporary duties as high as 266 percent on Chinese mushrooms, leeks and straw used to make traditional tatami mats for Japan-ese homes.

China responded with tariffs of as much as 100 percent on the Japanese goods.

Japan allowed its levies to expire on Nov. 8 while it considered whether to impose tariffs that would last as long as four years. Yesterday was the deadline for that decision. China maintained its levies on the Japanese goods.

"China agreed to commit to orderly trade of agricultural products between the two nations," Japan's agriculture minister, Tsutomu Takebe, said at a Beijing press conference.

Under the agreement, Chinese and Japanese farmers will form a "private association" to exchange information on market demand, product quality, production volume and prices for their products.

The organization will be monitored by both governments, Takebe, said.

Tokyo said China's tariffs violated WTO rules because Beijing couldn't invoke retaliatory measures without first taking the dispute to the trade arbiter. Japanese government officials had said they were preparing for an appeal to the WTO, which China joined this month.

Hiranuma said last night that he was under instructions from Jap-anese Prime Minister Junichiro Koizumi to end the dispute through negotiations.
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