Japan-China to hash out trade again

By Alex Frew McMillan
CNN Hong Kong

(CNN) -- Asia's biggest trading partners, China and Japan, will this week try again to resolve their festering trade dispute.

They will hold vice ministerial talks in Tokyo on Wednesday, China's official news agency, Xinhua has reported.

A previous round of talks last Tuesday brought together China's trade minister, Shi Guangsheng, and his counterparts from Japan's agriculture and trade ministries. But the two sides saw no progress in settling their differences.

Japanese Prime Minister Junichiro Koizumi has ordered the trade ministry to prepare long-term caps on imports of Chinese spring onions, shiitake mushrooms and tatami-mat rushes.

Japan readies long-term curbs

It was caps on those three products that sparked the trade spat when they were first imposed in April. China responded with 100 percent punitive tariffs on Japanese cars, cell phones and air conditioners.

Japan's temporary curbs expired in November. Tokyo has said it will decide by Friday whether to reinstate the caps for a four-year spell, something it is preparing to do.

Both Japan and China fault each other under World Trade Organization rules. One of China's first roles as a new member of the WTO could be to make its case to Geneva.

Japan says retaliatory caps like China's are not allowed under WTO rules and that its curbs are necessary safeguards.

Developing countries like India and China insist that their produce get greater distribution in developed countries like Japan, which has some of Asia's most protectionist farm-goods caps.

China's farmers also face heavy competition from greater imports of overseas produce, some of which is of better quality. The government is prepping for an employment crisis, as many farmers leave the countryside to look for work in cities.

China on Monday decided to refund 650 million yuan ($79 million) in agriculture tax to farmers hit by drought, crop failure and floods in Anhui province in eastern China.