Friday December 21 4:06 AM ET China and Japan End Acrimonious Trade Row By Bill Savadove
BEIJING (Reuters) - China and Japan beat a deadline to end an acrimonious nine-month trade row over farm products on Friday, averting further damage to economic ties. But disputes between China and its trading partners were likely to grow as World Trade Organization membership accelerates its integration into the global economy, analysts said. The agreement came on the day of Japan's deadline to resolve the issue or move to full sanctions to protect its farmers from surging imports of Chinese leeks, shiitake mushrooms and rushes used for traditional tatami mats. The two countries reached a deal in Beijing talks lasting just an hour between China's Foreign Trade Minister Shi Guangsheng and Japanese counterpart Takeo Hiranuma, officials said. ``China and Japan have reached a consensus,'' a spokesman for China's Foreign Trade Ministry said. ``The Japanese government decided not to impose safeguard 1measures from the long-term perspective of promoting friendly ties between Japan and China,'' Japanese Prime Minister Junichiro Koizumi said in a statement issued in Tokyo. Japan was China's largest trading partner last year. The spark for the trade row came in April, when Japan imposed temporary ``safeguard'' curbs on the three Chinese products, claiming its right under WTO rules. China struck back in June with 100 percent punitive tariffs on Japanese cars, mobile phones and air conditioners. Japan's original limits lapsed on November 8, but Tokyo was preparing full sanctions if the row was not resolved by December 21, the day it would have to present evidence to the WTO to upgrade the curbs. NEW PANEL PLANNED Under the deal, Japan would not impose any safeguard measures while China would scrap its retaliatory tariffs, according to a memorandum issued after the talks. The two countries also pledged to increase cooperation on farm trade to prevent disputes and set up soon a non-government consulting body -- composed mainly of producers -- to exchange information on the three products, Japanese officials said. ``Both sides will use government and non-government channels to take a further step to deepen and strengthen cooperation on the trade of farm products,'' the memorandum said. But analysts said more disputes were likely after China's entry to the WTO, which became official just last week. ``Now China is one of the key players -- the seventh largest trading nation -- so as integration deepens you will run into more problems,'' said Fred Hu, Greater China economist for Goldman Sachs in Hong Kong. Tokyo's original tariffs affected Chinese products worth $100 million a year, while China's curbs effectively shut out Japanese goods worth $700 million. Although just a fraction of bilateral trade, which was more than $80 billion last year, the spat hurt ties between the two countries for months as both refused to budge. China threatened to take the dispute to the WTO despite pledges from both sides to resolve differences through talks. BACK TO BUSINESS Japanese car makers hailed the agreement, but farmers said the government needed to do more to help them. ``We hope we can get back to business as early as possible,'' Toyota Motor Corp President Fujio Cho told a news conference in Tokyo. Toichi Ubukata, an official at an agricultural cooperative in leek-growing Saitama prefecture, said the government needed to come up with a policy to address the basic problems of domestic agriculture. China is threatening protected Japanese agriculture with cheap labor, vast land resources and proximity to the island.
