THE unthinkable looks like it is finally happening. After nearly 20 months of fruitless trade talks, the world's two biggest economies are set to lock horns in an unprecedented trade war. Who can blame the Americans for their exasperation at not having had a fair crack at the highly fortified Japanese market? Even with the dollar breaking all stops on its way down against the yen, there still appears little hope that the huge trade imbalance between the two countries will see any meaningful correction. And a trade deficit of US$66 billion is no laughing matter. The frustration felt by the US was amply summed up by its trade representative, Mickey Kantor, who accused the Japanese of being 'not only hypocritical' but 'inconsistently hypocritical'. Mr Kantor was referring to Japanese protestations that the US was trying to micro-manage trade. There is more than a little irony in the ongoing tussle between the two giants. The Americans actually banned the sale of Fords and Chevrolets in the early years of American occupation after World War II in the hope that this would speed the rebuilding of Japan's shattered domestic industry. The rest of it is history and has perhaps compounded the hurt felt by the US. Whether the trade spat spirals into a full-blown battle now depends on whether a face-saving compromise can be found on US demands for Japanese car-makers to draft fresh 'voluntary' plans to buy more US-made car parts. It looks increasingly unlikely, given the anger many Japanese feel at what they view as Washington's 'neglect' of the dollar and the resulting damage to Japanese car-makers and the economy. Ironically, a trade war would only send the yen even higher. Is there no hope then for a compromise? The Japanese say they will take their case to the World Trade Organisation if the US imposes punitive tariffs on its exports. Therein perhaps lies the answer. The winds of change are towards free trade and the US has played no small part in making it happen. Birth of the WTO owes as much to the efforts of the US as it does to anyone. If the Americans feel they have a genuine grievance, why not let the arbiters of free trade - the WTO - be the judge.