Japan and China square Off By Sanjay Paul For The News-Chronicle A recent trade spat illustrates the divergent fortunes of Japan and China. Acting at the behest of its farmers, Japan imposed import tariffs on a handful of agricultural products from China. The Chinese government retaliated instantly, imposing a punishing 100 percent tariff of its own on Japanese automobiles and electronics items. Now, developing countries are not supposed to challenge developed countries like this, and after all, Japan is the second largest economy in the world. But Japan's economic fortunes have faltered lately. Enmeshed in a decade-long recession, the country confronts soaring unemployment, diminished consumer confidence and stagnant business investment. In a futile effort to spur economic activity, the government has embarked on a massive public spending spree, leaving it saddled with sizeable annual budget deficits and one of the largest debt burdens in the developed world. China, on the other hand, continues to post impressive growth figures. Even the 1997-98 financial crisis that ravaged other parts of Asia left the Chinese economy largely unscathed. This year, while the U.S., Japan, Europe and Latin America contend with slowing economies, China's output of goods and services is growing sharply in excess of 5 percent per year. China is also an increasingly important market for foreign goods, including cars and electronics from Japan. And so when the Chinese government imposed a 100 percent tariff on those items, the effect on Japan's manufacturers was immediate and palpable. Toyota cars, slated for sale in China, started to pile up at the ports, and domestic pressure on the Japanese government began to intensify. In the end, Japan bit the bullet: it agreed to remove trade restrictions on the offending items. A placated China restored the free entry of Japanese goods. The incident illustrates China's growing economic clout in world affairs. Although it is classified as a low-income country by the World Bank, China nonetheless forced a high-income country into reversing its policy. The contretemps also revealed the lobbying might of the Japanese farmers who prevailed upon their government to impose trade barriers in the first place - to the detriment of Japanese consumers. China, having gained membership to the World Trade Organization, was recently granted permanent normal trade relations status by President Bush. Several Japanese corporations have already established a significant presence in the Chinese market; now, American firms look poised to do the same.