Car Talks Yield Little Hope

GENEVA -- The threat of record U.S. sanctions against Japanese automobiles loomed Tuesday as trade chiefs struggled -- without visible success -- to defuse the potentially devastating row between the world's two biggest economies.

One U.S. official said it would be "very hard" to reach a deal to open Japan's auto and spare-parts markets by Wednesday's midnight (in Washington) deadline.

Japan's Trade Minister Ryutaro Hashimoto said he had never been optimistic about chances of a breakthrough in his negotiations with U.S. Trade Representative Mickey Kantor.

President Bill Clinton planned to announce Wednesday whether to go ahead with the punitive tariffs on $5.9 billion worth of luxury Japanese automobiles, hours ahead of the deadline, officials said.

David Burns, a senior member of the U.S. delegation, said there were still serious difficulties on all three major dispute areas. He said both sides had offered new proposals in a bid to bridge the gap.

During an afternoon break in negotiations, Hashimoto was downbeat. He said he still didn't know if the two sides were near an accord.

"It was a very friendly fight," he said after the 90-minute morning session.

Evening talks started just after 5 p.m. in Geneva and were expected to continue late into the night.

The domestic political risks of being seen to cave in to the other side are high for both governments. But then so are the economic stakes of failure to reach an agreement.

In Tokyo, a senior trade ministry official said the sanctions would have a serious impact on the Japanese economy, which is only shakily pulling out of recession.

Although Japanese officials maintain that Tokyo will not take counterretaliatory measures, there are a flurry of rumors the government may yield to domestic pressure and hit back at U.S. farm exports or high-tech products.

Meanwhile, for the first time since the auto-sector talks started last week in Geneva, senior U.S. officials met with Japanese auto manufacturers. The session could signal movement in the discussions over U.S. demands that Japanese firms increase purchases of auto parts.

And Chrysler Corp. has announced in Tokyo it would pay about $119 million to buy a network of dealerships in the Tokyo area and in Yokohama to the southeast. That would let it market its cars directly to Japanese consumers.