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TRADE POLICY REVIEWS: FIRST PRESS RELEASE, SECRETARIAT AND GOVERNMENT SUMMARIES
Japan: March 1995

Japan's elimination of a number of voluntary export restraints with the United States and the European Communities, its increased use of international standards and its growing trade and investment in Asia should help Japan shift from "its past emphasis on bilateralism in trade relations" to one which confirms its greater integration in the multilateral trading system.

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See also:

Second press release
Chairperson’s concluding remarks


PRESS RELEASE
PRESS/TPRB/5
29 March 1995

Japan has reduced the number and scope of restrictions on exports. Back to top

Japan's elimination of a number of voluntary export restraints with the United States and the European Communities, its increased use of international standards and its growing trade and investment in Asia should help Japan shift from "its past emphasis on bilateralism in trade relations" to one which confirms its greater integration in the multilateral trading system. A new report by the WTO Secretariat on Japan's trade policies and practices also notes that firm progress in domestic deregulation, combined with the implementation of the Uruguay Round Agreements, should ensure improved access to Japan's market.

The report states that Japan has reduced the number and scope of restrictions on exports. Also, a number of "voluntary" export restraints (VERs) on machine tools, automobiles and steel to the United States and on machine tools to the EC were eliminated in 1993 or early 1994. Other long-standing restraints on pottery, chinaware and cutlery exports to the United States were to expire at the end of 1994 while the monitoring arrangement on car exports to the European Union is to be eliminated in 1999. Furthermore, since 1992, 17 of 28 export cartels have been abolished while many others have been reduced in scope. Export cartels related to VERs, to the protection of quality or intellectual property or to import monopolies in partner countries are to be reviewed with the objective of their elimination by 1999, states the report.

Japan has also increased its use of international standards. Not only has the number of Japanese standards corresponding to international norms doubled since 1992, but Japan is gradually increasing the scope of permission for foreign testing, certification and factory approval. The report states that mandatory testing remains in place for food, pharmaceuticals, electrical goods and products covered by consumer safety laws.

As concerns the geographical pattern of Japan's external trade and outward direct investment, the report states that trade and investment have shifted since 1992 and that Asia's share of exports, imports and foreign investment has grown considerably. Growth has been particularly rapid in bilateral trade flows with China and the ASEAN group. The report states that this reflects the rapid growth of Southeast and East Asian economies and the transfer of production from Japan to the Asian zone by certain manufacturers seeking lower costs. The Americas' share of Japan's imports has remained stable, while their share of Japan's exports is down marginally. The shares of exports to and imports from Europe have fallen.

Market access commitments made during the Uruguay Round call for Japan to increase the scope of its industrial tariff bindings, reduce industrial tariffs on a trade-weighted basis by some 56 per cent and, under the Agreement on Agriculture, to agree to convert all agricultural non-tariff measures, except on rice, to tariff quotas. The report states that out-of-quota duties will range up to more than 600 per cent.

The simple average tariff on industrial products is estimated to fall to some 4.6 per cent under Uruguay Round reductions. On an import-weighted basis, the average will decline from some 3.9 to 1.7 per cent. Tariffs and other non-tariff measures will be eliminated on a most-favoured nation basis on all pharmaceuticals, construction and medical equipment and beer. With some exceptions tariffs will also be eliminated on steel, distilled spirits, furniture, agricultural equipment, paper, pulp and toys.

In regard to government procurement policies, the report states that during the last two years, Japan has introduced an "Action Plan for greater fairness and transparency" in government procurement. The share of foreign suppliers under the Government Procurement Code has risen and, since 1990, the scope of single tendering has increased. The United States accounts for the largest share of contracts awarded to foreign suppliers, followed by European Union member countries.

Notes to Editors

1. The WTO Secretariat's report, together with a report prepared by the Government of Japan, will be discussed by the WTO Trade Policy Review Body (TPRB) on 4 and 5 April 1995. The review of Japan is carried over from the 1994 programme of trade policy reviews. The review will be a joint meeting of the TPRB and the GATT 1947 Council. This is the third review of Japan since the launching of the trade policy reviews in December 1989.

2. The WTO Trade Policy Review Body conducts a collective evaluation of the full range of trade policies and practices of each WTO member at regular periodic intervals and monitors significant trends and developments which may have an impact on the global trading system.

3. The two reports, together with a record of the Council's discussion and of the Chairman's summing up, will be published in due course as the complete trade policy review of Japan and will be available from the WTO Secretariat, Centre William, Rappard, 154 rue de Lausanne, 1211 Geneva 21.

4. The reports cover development in all aspects of Japan's trade policies, including domestic laws and regulations, the institutional framework, trade-related developments in the monetary and financial sphere, trade practices by measure and trade policies by sector. Attached are the summary observations from the Secretariat's report. Full reports will be available for journalists from the WTO Secretariat on request.

5. Since December 1989, the following reports have been completed: Argentina (1992), Australia (1989 & 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995), Canada (1990, 1992 & 1994), Chile (1991), Colombia (1990), Egypt (1992), the European Communities (1991 & 1993), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990 & 1992), Kenya (1993), Korea, Rep. of (1992), Macau (1994), Malaysia (1993), Mexico (1993), Morocco (1989), New Zealand (1990), Nigeria (1991), Norway (1991), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992), South Africa (1993), Sweden (1990 & 1994), Switzerland (1991), Thailand (1991), Tunisia (1994), Turkey (1994), the United States (1989, 1992 & 1994), Uruguay (1992) and Zimbabwe (1994).

The Secretariat’s report: summary Back to top

TRADE POLICY REVIEW BODY: JAPAN
Report by the Secretariat – Summary Observations

Japan in World Trade

The development of Japan's trade policies since its last Trade Policy Review has occurred against a background of change in the economy, with a sharp downturn over the period 1991-93 and the beginnings of a recovery in 1994. During the period, the Government introduced several fiscal stimulus packages, followed a generally accommodating monetary policy and actively pursued structural change, including a measure of trade liberalization and deregulation. Japan's trade and investment pattern has also evolved over the period; the merchandise trade surplus, while continuing to rise in U.S. dollar terms, peaked in 1992 as a percentage of GDP, falling in 1993 and 1994. The direction of both trade and investment has moved towards Asia in the past three years.

Growth in GDP fell from 4 to 0.1 per cent in the years 1991-93; domestic private investment, as a share of GDP, declined sharply in 1991, falling less rapidly in the next two years. Private consumption also slowed markedly and there was, simultaneously, increasing unemployment and growing retention of surplus labour. Wholesale prices declined and inflation, as measured by the consumer price index, fell to around 1 per cent. Falling import prices, with yen appreciation, appear not to have been fully passed through to the consumer.

The current account surplus measured in U.S. dollars rose to record levels in 1993 but declined in yen (peaking in the last quarter of 1993) and as a share of GDP. Following a surplus in 1991, when there was substantial recall of funds by Japanese investors, the long term capital account resumed its "normal" pattern of deficits in 1992 and 1993. The real effective exchange rate of the yen has appreciated substantially. The marked difference between yen and dollar valuations of the trade and current account surpluses have contributed to differing appreciations of the situation and, perhaps, to trade friction during the period.

Various packages of fiscal and monetary stimulus were introduced during the period. Low interest rates and subsidized housing credits helped to stimulate construction and, to some extent, private consumption. Led by domestic demand, recovery is expected to accelerate in 1995.

Although there has been no fundamental change in the law governing inward investment into Japan, a substantial package of promotion measures was introduced during 1992, when the previous prior-notification system was changed to an ex post reporting system, various tax incentives were introduced for foreign investors, and other support measures were strengthened. These measures were further reinforced in 1994. These stimuli have yet to be translated into a substantial inflow of new investment, although the overall inflow has quadrupled since the mid-1980s.

The geographical pattern of Japan's external trade and outward direct investment has shifted in the last three years. Asia's share of exports, imports and foreign investment has grown considerably, with particularly rapid growth in bilateral trade flows with China and the ASEAN group. This reflects the rapid growth of Southeast and East Asian economies and the transfer of production of certain manufactures from Japan to the Asian zone, in search of lower costs. The Americas' share of Japan's imports has remained stable, while their share of Japan's exports is down marginally; the shares of exports to and imports from Europe have fallen.

Institutional Framework

Little change has taken place in the institutional framework for Japan's trade policies since the last review. Consistency of domestic and external policies is sought through Cabinet deliberation and a number of inter-ministerial organizations. The Government has announced plans to strengthen the Office of Trade and Investment Ombudsman (OTO), provide for more frequent meetings of the Trade Conference (which establishes the broad orientation of trade policies and includes foreign participation) and in September 1994 created the Japan Investment Council - also with foreign participation - to examine investment policies.

Japan has ratified the Marrakesh Agreement establishing the World Trade Organization and is an original member of the WTO. In addition to gains from enhanced market access for exports and better intellectual property protection, Japan is expected to benefit from strengthened trade rules under the WTO, particularly with respect to anti-dumping, trade-related investment measures (TRIMs) and dispute settlement.

Trade Policy Features and Trends

Recent evolution

Recent economic policy aims to re-orient the economy towards greater reliance on domestic, rather than export demand; thus, since 1992, under the 12th Five-Year Economic Plan, there has been increased focus on structural measures such as deregulation and trade liberalization. Successive deregulation packages in April and September 1993 and February and June 1994 sought to reduce the scope of, and clarify government regulations, especially in distribution, while new import promotion guidelines were issued in October 1993.

In the Uruguay Round, Japan undertook to increase the scope of industrial tariff bindings from 97 to 99 per cent of tariff lines; to reduce industrial tariffs on a trade-weighted basis by some 56 per cent; and, under the Agreement on Agriculture, to convert all agricultural non-tariff measures, except on rice, to tariff quotas, with out-of-quota duties ranging to over 600 per cent. Rice imports are not currently subject to tariffication; the question of the continuation of special treatment agreed in the Uruguay Round is to be negotiated in the year 2000. Japan has made substantial commitments in all areas of services except certain basic telecommunications and international maritime transportation, on which negotiations are continuing.

Other measures taken during the review period include the prolongation in 1991 of Japan's GSP scheme for ten more years (and its extension to a number of European countries in transition); the relaxation of rules of origin for GSP and the promulgation in 1993 of the Administrative Procedures Law, to bring more clarity into "administrative guidance" procedures. Japan has never removed any developing country from the coverage of its GSP scheme.

Type and incidence of trade policy instruments, including sectoral effects

There have been no major changes in Japan's tariff structure since the last review. The simple average rate was 7.1 per cent in 1993. Some 2 per cent of tariff lines bear rates greater than 30 per cent, while nearly 60 per cent are rated at 5 per cent or below. Tariff peaks occur in footwear, clothing and leather products, food products and beverages, rising to 174 per cent (the ad valorem equivalent of a specific rate) on some sugar products. Substantial tariff escalation occurs in a number of sectors, mainly from raw materials to semi-processed goods, particularly in food products and food manufacturing.

The simple average tariff on ISIC-based "industrial" products is estimated to fall to some 4.6 per cent under Uruguay Round reductions; on an import-weighted basis, the average will decline from some 3.9 per cent to 1.7 per cent. Under the July 1993 agreement among the "Quad" members (Canada, the European Union, Japan and the United States), brought into the Uruguay Round results, tariffs and NTMs will be eliminated on an m.f.n. basis on all pharmaceuticals, construction and medical equipment, and beer; with some exceptions, tariffs are also to be eliminated on steel, distilled spirits, furniture, agricultural equipment, paper and pulp, and toys, while an agreement was reached to "work" towards tariff cuts of up to 50 per cent on ceramics, glass, textiles and clothing.

Various tariff reductions were made in 1993 and 1994 either autonomously or under existing agreements, including on beef (although authorization for an emergency surcharge of 25 per cent remains in force), potato flakes, corn grits for cornflake making, sugar and auto parts, while the tariff quota system on heavy fuel oils was abolished. Most specific and mixed duties are to be replaced by ad valorem rates.

Port and customs procedures have been accelerated, leading to a reduction of one third in clearance time from arrival at the port; Japan is working towards further acceleration of such procedures through an extension of computerization. The number of Foreign Access Zones (FAZ) is growing.

Certain fishery products are subject to import quotas, with a number of tariffs also remaining unbound. Surveillance of imports of silk cocoons and fabrics from Hong Kong and China remains in force; Japan is to present a phase-out programme to the new Textiles Monitoring Body on silk imports from the Republic of Korea. Surveillance is also in force on some other products, including tuna, marlin, seaweed, species controlled under CITES, and certain types of coal. State trading remains in operation for salt, tobacco products (although trade in raw tobacco has been liberalized), industrial alcohol and opium. The only remaining import cartel covers imports of silk from China.

The number of Japanese standards corresponding to international norms has doubled since 1992, and Japan is gradually increasing the scope of permission for foreign testing, certification, and factory approval. Mandatory technical regulations (in some cases applying otherwise voluntary standards) are in force on food, pharmaceuticals, electrical goods and products covered by the Consumer Products Safety Law.

Japan introduced an Action Plan for greater fairness and transparency in government procurement in late 1993 and early 1994. The share of foreign suppliers under the Government Procurement Code has risen; since 1990, the scope of single tendering has increased. The United States accounts for the largest share of contracts awarded to foreign suppliers, followed by EU members.

The scope of import promotion measures was expanded in 1994. While perhaps responding to political needs and perceptions, the selective nature of some such measures, applied to duty-free imports only, may increase the effective protection of less competitive items.

Under Uruguay Round provisions, Japan is reducing the number and scope of restrictions on exports. A number of "voluntary" export restraints (on machine tools, automobiles, and steel to the United States and on machine tools to the EU) were eliminated in 1993 or early 1994; other long-standing restraints on pottery, chinaware and metal flatware (cutlery) exports to the United States were to expire at the end of 1994. The monitoring arrangement on car exports to the European Union is to be eliminated in 1999. Seventeen of 28 export cartels have been abolished since 1992; many others have been reduced in scope. Remaining export cartels, related either to VERs, to protection of quality or intellectual property, or to import monopolies in partner countries, are to be reviewed with the objective of their elimination by 1999.

Changes have also taken place in the application of Japan's competition law under the Antimonopoly Act. Retail Price Maintenance is to be abolished, except on literary works, by end-1998; the number of permitted ("exempted") cartels has declined rapidly and remedial actions (cease and desist orders and surcharges) have increased. Similarly, the requirement to notify, ex post, contracts between Japanese and foreign firms has been narrowed in scope and the number of such notifications has fallen.

Considerable concern remains about the effects on foreign access of horizontal and vertical groupings (kigyo-shudan and keiretsu) in the Japanese economy. In this field, promotion of competition among suppliers or linked firms may not be inconsistent with barriers to access. The strength of the Antimonopoly Act in respect of horizontal groupings is questioned. There appears to be some evidence that keiretsu linkages are weakening, either through greater links with foreign plants (although these may include Japanese subsidiaries), deregulation, or in the retail field through greater competition and discounting.

Temporary measures

Japan imposed a definitive anti-dumping duty on ferro-silico-manganese from China in February 1993; anti-dumping investigations were begun against cotton yarn from Pakistan in February 1994. This marks a change in Japanese practice, which had hitherto always avoided such measures. There is evidence that Japan has applied some of the new Uruguay Round guidelines in taking these actions. Japan has still never used countervailing action or GATT Article XIX safeguard measures.

Trade Policies and Foreign Trading Partners

Since the last Trade Policy Review, Japan has taken steps in the direction of greater integration into the global economy. Principal among these have been domestic deregulation and ratification of the Uruguay Round.

Deregulation seeks to make the economy more outward- rather than export-oriented, promoting greater reliance on domestic demand. Firm continuation of this process, both supporting and supported by emergence from the recession, could ensure improved access to the Japanese market.

Japan's implementation of the Uruguay Round Agreements will also improve access to its market over time. However, it is not clear that the results will ameliorate the existing imbalance between industry and certain highly-assisted parts of agriculture. Further liberalization in agriculture would promote overall domestic efficiency.

Japan will benefit from the strengthened trade rules agreed in the Uruguay Round, including the improvements in dispute settlement. This combination of domestic and external developments should help to move Japan from its past emphasis on bilateralism in trade relations, allowing it to confirm its greater integration in the multilateral trading system.

Government report Back to top

TRADE POLICY REVIEW BODY: JAPAN
Report by the Government

The Japanese economy has been in a state of recession since May 1991. The growth rate of real GDP was 4.3 per cent in 1991, 1.1 per cent in 1992, and -0.2 per cent in 1993. Given this situation, and to achieve a steady recovery led by domestic demand, the Government of Japan established its "New Package of Economic Measures" in April 1993, "Immediate Economic Measures" in September 1993, and "Comprehensive Economic Measures" in February 1994, and has steadily implemented them. Due partly to these efforts, the Japanese economy has been heading for a gradual recovery since bottoming out in October 1993. Meanwhile, Japan's current account surplus came to approximately ą14.6 trillion in 1993, a slight decline from the previous year. However, on a dollar basis, the 1993 surplus was larger than that in 1992 as a result of the J-curve effect from the stronger yen. In view of this development, Japan incorporated steps for import promotion into the series of economic measures mentioned above. It also further strengthened the import promotion policies already being implemented, through such measures as the establishment of the Government Actions for Import Promotion of March 1994 (see attachment 1). Japan has also implemented various measures to strengthen its competition policy and promote deregulation. As a result, and due to other factors, such as a further appreciation of the yen and an increase in the volume of imports, Japan's current account surplus in 1994 displayed an overall tendency to contract.

In terms of deregulation, Japan has put together three deregulation packages since September 1993, which cover over 1,000 items. Moreover, policies to promote deregulation in the future have also been established through setting up the Deregulation Action Program, strengthening of investigation concerning the establishment of new regulations, and creating a Deregulation White Paper. In the area of competition policy, Japan has demonstrated that it considers the active development of competition policies to be a key issue, through such decisions as the "Outline of External Economic Reform Measures", a Cabinet decision made in March 1994, its report, "Regarding the Policy for Promoting Deregulation Hereafter", approved by the Cabinet in July 1994. Accordingly, Japan is taking a variety of steps, including stricter administration and stronger enforcement of the Antimonopoly Act, a push for review of governmental regulations and the exemptions from the Antimonopoly Act, and surveys on the actual state of transactions, among others. Japan is thus committed to pressing on with reforms to create a society more open to the international community.

Starting in 1988, Japanese exports (on a customs clearance basis) increased for five straight years in yen terms, then started to decline in 1993, and dropped further in the first quarter of 1994, compared to the corresponding period of the previous year. They showed certain increases, however, in the second and third quarters. Imports (on a customs clearance basis) have fallen for three straight years in yen terms since 1991, mainly due to the drastic drop in import prices. Although imports continued to decrease on a year-on-year basis through 1994, they showed an upward trend in the second and third quarters, which may largely be accounted for by the increased volume of imports. The manufactured product import ratio is rising: it reached a record 52 per cent in 1993, and has continued to rise significantly since the beginning of 1994. Japan is continuing to make efforts to improve market access for agriculture, forestry and fishery products, as well as to expand imports of these products. In fact, Japan has become the largest net importer of agricultural products in the world, and its food self-sufficiency rate of 46 per cent is the lowest among the developed countries. Given these circumstances, the concerns of Japanese citizens about food security are quite high (see attachment 2).

The maintenance and strengthening of a free and non-discriminatory multilateral trading system is Japan's fundamental policy. Japan has consistently supported the General Agreement on Tariffs and Trade (GATT) since it became a contracting party to the Agreement. It believes that the global economy has prospered under the open, multilateral trading system under the GATT. As a result of the Uruguay Round, a new multilateral trading system has been set up with the establishment of the World Trade Organization (WTO) that covers such new areas as trade in services and trade-related intellectual property rights. Japan strongly hopes that world trade will further expand under the WTO, thereby leading to greater global prosperity. Japan is determined to make a positive contribution toward these ends.

One of the aims of the Uruguay Round was to strengthen the dispute settlement system. Japan's basic policy is that trade-related disputes should be resolved within the multilateral framework, based on multilateral rules, under the WTO. Japan intends to work continuously to improve and reinforce these rules. On the other hand Japan is conducting bilateral negotiations with the United States and the EU, among others, recognizing that these negotiations will promote free trade and economic activities. Japan believes that the entire world will share in the fruits of these negotiations on the Most-Favoured-Nation treatment basis, thus contributing to the development of the overall global economy. Japan also believes that the promotion of cooperative economic relations with the nations of the Asia Pacific region through such a forum as the Asia Pacific Economic Cooperation (APEC) will foster the growth of an open regional economic community in the area. Japan feels that this will stimulate world trade and thereby contribute to the development of the global economy.

In recent years, there has been an increase in the number of and an expansion in the scope of regional arrangements as has been seen in, for example, the establishment of NAFTA and the enlargement of the EU to include Austria, Finland and Sweden. Such regional agreements together account for a considerable portion of world trade. Japan is of the view that this trend toward regional integration might weaken the free, non-discriminatory, and open multilateral trading system under the GATT/WTO, and is deeply concerned that it might lead to trading blocs being formed within the global economic community. From this perspective, Japan has insisted that these regional trade arrangements must not infringe on the rights under the GATT/WTO of the countries not parties to these arrangements, and that the arrangements should be open so as to supplement and reinforce the multilateral free trading system under the GATT/WTO and contribute to the further liberalization and stimulation of world trade.

Attachment 1

Import Promotion Policies

Since October 1992, Japan has been strengthening its import promotion policies through successive economic policy programs devised in April and September 1993 and in February 1994, as well as the FY 1994 Government Actions for Import Promotion of March 1994, established as part of the External Economic Reform measures. These policies have led to the implementation of taxation and financing measures that promote imports, supporting efforts made by foreign companies and governments to increase exports to Japan, and the improvement of the import promotion infrastructure.

Import expansion policies established and strengthened since October 1992 are as follows:

Extension and expansion of the System of Tax Incentives for Manufactured Product Imports.

- Relaxation of requirements for application concerning the import increase rate (FY 1993 tax reform).

- Enabling sales subsidiary companies of foreign manufacturers to use tax deductions or credit, etc. (FY 1993 tax reform).

- Extension of the period of validity (April 1, 1995-March 31, 1997) (FY 1995 tax reform).

- Addition of products eligible for this system (medical products and vehicle parts) (FY 1995 tax reform).

Expansion of policy financing.

- Establishment of a financing system at the Japan Development Bank to strengthen the Financing for Improvement of the Import Infrastructure, thereby further strengthening the already-existing Financing for Improvement of the Import System.

- Expansion of Manufactured Product Import Financing at the Export-Import Bank of Japan.

- Implementation of temporary interest-reduction measures for this financing and loans provided by the Small Business Finance Corporation and the People's Finance Corporation to facilitate import sales.

Expansion of import promotion activities by the Japan External Trade Organization (JETRO).

- Opening of the Business Support Center, which provides free office space, etc. to support foreign business people coming to Japan to promote exports.

- Opening of the Integrated Import Promotion Center and local Import Promotion Centers to promote the display and sales of imported goods in regions and major cities other than Tokyo.

- Promotion of housing imports, through establishing permanent exhibition zones for imported houses, etc.

Promoting the establishment of Foreign Access Zones (FAZ).

Since March 1993, the following 13 regions have received approval under the Local Import Promotion Plans to establish Foreign Access Zones, which include ports and airports as well as their surrounding areas. A greater increase in imports can be expected in these Zones, through the creation of concentrated facilities and projects to promote imports within these regions.

- Regions approved in March 1993:

Kansai International Airport Area (Osaka Prefecture); Osaka Port Area (Osaka city); Kobe Port Area (Kobe city); Matsuyama Port Area (Ehime Prefecture); Kitakyushu Port Area (Kitakyushu city); Nagasaki Airport Area (Nagasaki Prefecture)

- Regions approved in March 1994:

Kawasaki Port Area (Kawasaki city); Yokohama Port Area (Yokohama city); Hiroshima Airport Area (Hiroshima Prefecture); Shimonoseki Port Area (Yamaguchi Prefecture); Oita Port Area (Oita Prefecture); Shin-Chitose Airport Area (Hokkaido)

- Region approved in December 1994:

Komatsu Airport Area (Ishikawa Prefecture)

As a result of these projects and policies to promote importation, there has been a steady increase in imports into Japan. Dollar-based imports in FY 1993 were up 4.8 per cent over the previous fiscal year.

Attachment 2

Mining and Industrial Sector

As a result of a series of steps to reduce or eliminate customs duties, Japan's average tariff rate for mining and industrial products stands at 3.8 per cent (1988; GATT rate basis), lower than the 5.5 per cent rate for the United States and the 5.6 per cent rate for the European Community. As a result of the Uruguay Round, the average Japanese tariff rate will decline by 61 per cent compared with that before the Uruguay Round, a much larger reduction than those made by the United States and the EU (both between 30 per cent and 40 per cent). Thus, Japan's average tariff rate will be set at 1.5 per cent. This is less than the rates for the United States and the EU (both between 3 per cent and 4 per cent). With Japan's liberalization of imports on coal in April 1992, no mining and industrial products are currently under an import quota system, making Japan's market one of the most open in the world. Thanks to such efforts, "border measures" in Japan, such as customs duties and quantitative import restrictions, are the least restrictive in the world today. Nevertheless, Japan is promoting further improvements while also taking steps to expand imports. Efforts are also being made to promote the smooth progress of industrial structural adjustment so that the Japanese economy may be brought into greater harmony with the economy of the world at large. With a view toward promoting a balanced expansion of trade, Japan does not impose such "border measures" as import restrictions, even in connection with domestic industries that have suffered a decline in relative competitiveness due to changes in the economic environment. Rather, following the market mechanism, Japan has attempted in such cases to encourage the movement of labour and capital to more highly competitive industries.

Japan has achieved important results over the past ten years from measures designed to promote the opening of its markets and the expansion of imports. These included results produced by the 1985 Action Program for Improved Market Access, the introduction in 1990 of a taxation system designed to promote manufactured imports, and a comprehensive import expansion program, unequalled in other developed countries, which eliminated tariffs on more than one thousand items. From 1985 to 1993, Japan's imports of merchandise increased dramatically from 40.2 billion dollars to 125.2 billion dollars (both on a customs clearance basis). As a result, the percentage of manufactured products in Japan's total imports jumped from 31.0 per cent to 52.0 per cent over the same period.

In the past, Japan has implemented voluntary export restraints (VERs) on the basis of bilateral negotiations in such areas as automobiles and steel. However, most of these VERs are no longer in place and the remaining VERs are to be abolished or otherwise brought into conformity with the WTO Agreement.

Agriculture, Forestry and Fisheries Sectors

As the internationalization of the Japanese economy progresses, Japan has made every possible effort to improve market access for agricultural, forestry and fishery products despite the difficulties surrounding domestic industries of these fields. As a result, the number of items subject to import restrictions was reduced from 103 in 1962 to 12 in 1994 (22 items under the Harmonized System tariff-line basis).

Japan did its utmost for the Uruguay Round negotiations on agriculture. As a result of the negotiations, Japan will replace import restrictions on all items except for rice with tariffs. As for rice, despite very difficult domestic conditions, Japan will provide minimum-access opportunities.

Upon accepting the Uruguay Round Agreement on Agriculture, Japan plans to implement several measures within the framework of the Agreement in order to adjust its agricultural sector and rural areas to the new international environment. These include the improvement of the agricultural infrastructure, the measures to promote the transfer of rights on agricultural lands, and the measures to promote development of hilly and mountainous areas.

Japan's food self-sufficiency rate fell below 50 per cent on a calorie basis in FY 1992, to 46 per cent. This is the lowest level among the industrialized nations. Given this situation, concerns of Japanese citizens on food security are quite high.

Along with the above-mentioned efforts to improve market access for agricultural, forestry and fishery products, Japan is also working to expand imports. In 1993, Japan imported US$61.3 billion worth of agricultural, forestry and fishery products, while it exported US$2.8 billion worth of these products. This deficit of US$58.6 billion makes Japan the largest net importer of agricultural, forestry and fishery products in the world. Moreover, as part of its domestic policy, Japan has been making efforts to control the production of specific agricultural products that tend to be over-produced, in order to prevent possible confusion of world markets by their exportation.  Back to top