30 January 1998
POLICY REVIEW BODY: REVIEW OF JAPAN
TPRB'S EVALUATION Back to top
The Trade Policy Review of
the World Trade Organization (WTO) concluded its fourth review of Japan's trade policies
on 27 and 28 January 1998. The text of the Chairperson's concluding remarks is attached as
a summary of the salient points which emerged during the discussion.
The review enables the TPRB
to conduct a collective examination of the full range of trade policies and practices of
each WTO member country at regular periodic intervals to monitor significant trends and
developments which may have an impact on the global trading system.
The review is based on two
reports which are prepared respectively by the WTO Secretariat and the government under
review and which cover all aspects of the country's trade policies, including: its
domestic laws and regulations; the institutional framework; bilateral, regional and other
preferential agreements; the wider economic needs and the external environment.
A record of the discussions
and the Chairperson's summing-up, together with these two reports, 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.
Since December 1989, the following reports have been
completed: Argentina (1992), Australia (1989
& 1994), Austria (1992), Bangladesh (1992), Benin (1997), Bolivia (1993), Brazil (1992
& 1996), Cameroon (1995), Canada (1990, 1992, 1994 & 1996), Chile (1991 &
1997), Colombia (1990 & 1996), Costa Rica (1995), C˘te d'Ivoire (1995), the Czech
Republic (1996), Cyprus (1997), the Dominican Republic (1996), Egypt (1992), El Salvador
(1996), the European Communities (1991, 1993, 1995 & 1997), Fiji (1997), Finland
(1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India
(1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992, 1995 & 1998),
Kenya (1993), Korea, Rep. of (1992 & 1996), Macau (1994), Malaysia (1993 and 1997),
Mauritius (1995), Mexico (1993 & 1997), Morocco (1989 & 1996), New Zealand (1990
& 1996), Nigeria (1991), Norway (1991 & 1996), Pakistan (1995), Paraguay (1997),
Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994),
Singapore (1992 & 1996), Slovak Republic (1995), South Africa (1993), Sri Lanka
(1995), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 &
1995), Tunisia (1994), Turkey (1994), the United States (1989, 1992, 1994 & 1996),
Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).
TRADE POLICY REVIEW BODY: REVIEW OF
CONCLUDING REMARKS BY THE CHAIRPERSON Back
During the last two days,
the Trade Policy Review Body (TPRB) has conducted the fourth review - the first under WTO
provisions - of Japan's trade policies and practices. These remarks, made under my own
responsibility, summarize the salient points raised during the discussion; they are not
intended to substitute for the collective evaluation and appreciation of Japan's trade
policies and practices.
The discussion, including
the introductory statement of Japan and the remarks of the two discussants, developed
under three main themes: (i) macroeconomic background and structural reform, (ii) trade
policies, and (iii) sectoral issues. Participants also raised a number of questions in
writing. The representative of Japan provided a comprehensive reply in the context of the
meeting and undertook to provide further details as necessary.
Macroeconomic background and structural reform
Japan's important role in the global and regional economy, in the context of the economic
crisis experienced by several countries in East Asia. Members welcomed recent measures
aimed at increasing domestic demand in Japan. However, some doubts were expressed whether
these measures were sufficient and would produce results quickly enough, to address the
current economic issues facing Japan. Some members queried whether official projections
for growth should be adjusted downwards in the light of current developments. Participants
emphasised the need for Japan to stimulate domestic demand, rather than rely on exports to
revive growth. Some participants expressed concern on the recent widening of the current
account and trade surpluses.
Participants commended the
progress made to date in deregulation and structural reforms and the recent announcement
of a new programme to replace the current Deregulation Action Programme. They asked for
supplementary information on the new programme. Some members noted that certain sectors
remained highly regulated, including agriculture, food processing, construction,
transportation, telecommunications, financial services and distribution, and urged
widening of the scope of deregulation and a faster pace of reform. Concerns were also
raised that deregulation might result in new types of regulation. While some welcomed the
opportunities given by Japan for comment by foreign authorities on deregulation, others
raised concerns regarding the membership of the monitoring group for the deregulation
questions relating to the enforcement of competition policy by the Japan Fair Trade
Commission, and urged Japan to strengthen its competition policy regime. Questions were
also raised on Japan's perspectives on the balance between outward and inward investment.
In reply, the representative
of Japan said that recent tax reductions should add some 0.2 per cent to Japan's
growth, together with a positive psychological effect on consumption. Structural reform
should add a further 0.9 per cent per annum to growth in the period 1998-2003.
Efforts to stimulate domestic demand through deregulation and reduction in prices were
bearing fruit. The Asian currency crisis could affect Japanese exports adversely - both
directly, and indirectly through changes in competitiveness - while stimulating imports
from Asian countries. A possible fall in Japanese investment in East Asian domestic
consumption could be balanced by investment for future exports.
Concerning the current
account and trade surpluses, the authorities expected export growth to slow and imports to
accelerate in FY 1998: the surplus in goods and services could be some
1.2 per cent of GDP and the current account surplus around 2.4 per cent,
comparable to previous levels.
Deregulation was having a
stimulating economic effect and these efforts would be continued. Concrete examples of
structural reform included the liberalization of gasoline imports, elimination of
demand/supply requirements in distribution and transportation, and foreign exchange
deregulation. Agriculture, construction and international transport had not been excluded
from the programme.
The work of the
Administrative Reform Committee had been completed. The Government had set up a body to
promote new deregulation efforts. A new three-year deregulation programme had been
established, covering all administrative areas. Comments on the programme were welcomed.
The representative of Japan
stressed that numerous exemptions to the Anti-Monopoly Act had already been abolished, and
others would be reviewed by March 1998. The exemptions for anti-recession and
rationalization cartels had been abolished in December 1997. The JFTC worked closely with
the public prosecutor in enforcing the law through administrative decisions and criminal
penalties. Care would be taken that administrative guidance would not replace
anti-competitive regulations and that restrictive practices not be introduced by trade
Japan had adopted in 1995 a
decision on increased transparency in governmental advisory bodies. Japan attached
importance to increasing inward foreign investment, both as a means to increase
competition in the domestic market and to encourage restructuring. Potential investors in
Japan benefited from a law providing a preferential tax system, and a scheme to make
available preferential credit.
Japan's emphasis on multilateralism in its trade relations and commended Japan's
contribution to the WTO process. It was stressed that Japan conducts its trade almost
entirely on an MFN basis, avoiding participation in preferential trade arrangements;
assurance was sought that Japan's bilateral trade agreements would consistently be applied
on an MFN basis.
Participants noted that
average tariffs in agriculture were higher than in manufacturing, and raised concerns on
tariff peaks and escalation in agriculture, food manufacturing, textiles, leather and
footwear. Some participants raised concerns on tariff quotas, including high out-of-quota
rates; the lack of a reallocation mechanism for unused tariff quotas; import quotas on
certain products; length of customs clearance times; and Japan's use of origin marking
Japan's efforts towards increased international harmonisation of standards, including
embodying of performance based criteria, and the adoption of new mutual recognition
arrangements, while noting that further progress could be made. Participants welcomed the
increase of transparency in quarantine procedures and the revision of some Japan
Agricultural Standards. However, concerns were raised on the complexity and cost of
sanitary and phytosanitary conditions; variety-specific approval procedures for fruits and
vegetables; and restrictive standards for frozen foods. Participants encouraged further
revision of Japan's Food Sanitation Law.
Some participants noted that
Japan's import and investment promotion scheme did not adequately address obstacles to
investment and that tax incentives under the Import Promotion Scheme may favour industrial
imports from developed countries. Questions were raised on the advantages of the Foreign
Access Zones for foreign exporters.
Participants also raised
concerns on the scope of state trading in Japan, as well as issues regarding transparency
and the state of liberalization in government procurement procedures.
Participants noted recent
reductions in the examination periods for patent approvals, and asked for the scope of
further actions. Participants also requested information on the proposed amendment to the
Civil Procedures Act concerning trade secrets.
Participants raised concerns
on the product coverage of Japan's GSP scheme; and on trade policy towards least developed
countries, including in the follow-up to the recent High Level meeting.
The representative of Japan
thanked Members for their recognition of Japan's commitment to the MFN principle in the
multilateral trading system. He saw no possibility under present conditions of this
commitment weakening. Regional trading agreements, while they could contribute to trade
liberalization, had the potential danger of undermining the MFN principle. He noted that
tariff rates were reviewed every year on the basis of requests from foreign and domestic
entities. Customs clearance times were difficult to compare among countries with differing
import systems but efforts were constantly being made to reduce delays; for example, an
immediate release system had been introduced for air cargo, and cut flower imports from
the EU and Australia were cleared in an average of 1.8 hours.
On TBTs, Japan had decided
in 1997 on a review of procedures to facilitate imports. Legislation to adopt performance
criteria had been sent to the Diet to encourage the adoption of international standards.
The representative provided details on standards, both concerning JIS and JAS. Japan was
giving consideration to recognizing foreign certification agencies.
The representative also
provided information on Japan's SPS measures, including those on frozen products, fruits
and vegetables, and plants. Details were given on animal inspection, including disease
The representative of Japan
noted that the share of manufactured imports in GDP had risen from 3.2 to 4.5 per
cent between 1994 and 1996: therefore he was confident that the import promotion programme
was working. Its central focus was not on incentives; deregulation and recognition of
foreign standards were also import promotion measures. The import promotion tax concession
system had been extended until 1999: it was applied on an MFN basis to all countries
exporting duty-free items, not favouring imports from industrialized countries. Imports
into Foreign Access Zones had grown more rapidly than the total: again, the infrastructure
of FAZs were available to imports from all sources.
State trading enterprises
sought specific policy objectives, and Japan believed their operation was consistent with
WTO rules. Information was given on state trading in livestock and tobacco.
Foreign participation in
government procurement varied across products, but overall it was higher than in other
major trading partners. Moreover, Japan was going beyond its obligations under the GPA.
Regarding IPRs, Japan was
making efforts to shorten the period of examination for the granting of patents,
trademarks and designs. Administrative procedures were also being streamlined.
Japan's GSP system had a
broad coverage and efforts had been made to simplify its use. The system offered
particular advantages to least developed countries. The GSP was currently under review to
remove countries that had reached higher stages of development; LDCs had more favourable
treatment under the GSP scheme.
Some participants raised
concerns about the levels of protection and support for agriculture, and likely policy
options in the future, including in the next round of liberalization negotiations.
Questions were also raised on testing and certification requirements for agricultural
products and regulatory obstacles to trade in pigmeat. Others raised concerns about the
WTO consistency of the SBS system on rice, the continuation of import quotas on fisheries
and the import cartel of laver. A number of participants suggested that the results of
Japan's agricultural policies had been inconsistent with the Government's own food
security objective. Questions were raised on moves to review Japan's Basic Agricultural
Some participants raised
concerns about inadequate reimbursement prices of pharmaceuticals, also noting burdensome
and costly testing procedures for medical devices, pharmaceuticals, chemicals, mechanical
and electrical appliances. The continuation of regulatory obstacles to trade in leather
and leather footwear was also noted.
Japan's contributions to the WTO financial services and basic telecommunications
negotiations. However, they raised concerns about low productivity in some services
sectors and openness of certain services areas; complex regulations in certain services
sectors; and the low level of competition in some services. Particular attention was paid
to construction, financial, legal, accounting and distribution services. Participants
sought an assessment of the effects of weakness in the financial sector on the trade
policy of Japan. Questions were raised on transparency and disclosure in the financial
sector, including criteria for receiving public funds. Members requested an up-to-date
assessment of the implementation of the "Big-Bang" programme, especially in the
light of recent regional developments.
Some members urged further
deregulation in construction materials, including further recognition of international
certification procedures, moving towards performance-based standards, revision of fire
safety restrictions, and recognition of qualified foreign organizations as Registered
In view of the limited time,
the representative of Japan in his reply focused on selected sectoral issues.
In respect of agriculture,
he said that as regards rice, Japan was faithfully implementing the Uruguay Round
agreement, particularly by setting the price for minimum access rice some
20 per cent below that for domestic rice and promoting consumption of minimum
access rice in Japan's market. Administration of unfilled tariff rate quotas had been
improved in FY 1997 by permitting applications for unused quotas at different periods. He
noted that the trigger level for special safeguard provisions was based on imports in the
previous three years, which in Japan's view was in conformity with the Agriculture
Agreement. The import quota on fisheries was intended to prevent resource exhaustion in
surrounding waters and was, in Japan's view, justifiable under GATT Article XI:2(i).
Concerning footwear and
leather, the representative described Japan's tariff quota system, and noted the specific
difficulties of this sector. He also stated that prior confirmation system for silk aimed
to ensure the faithful application of bilateral agreements, not to limit imports; this
measure would be phased out by 2004.
Japan had eliminated tariffs
on autos in 1978, and imports had increased substantially in recent years. There was no
government involvement in dealership arrangements. The representative gave information on
the reclassification of vitamins, herb and mineral products and noted that Japan's tariff
classification would not be affected.
The representative of Japan
noted concerns regarding low productivity in services, particularly distribution, and
suggested that differences in productivity levels between services and manufacturing were
not significantly different from other countries. He said that the Deregulation Action
Programme sought to promote transparency in services and to simplify administrative
procedures and notification or reporting requirements. He gave examples of increases in
recent years in foreign service providers in telecoms, construction, legal and all areas
of financial services. He called attention to liberalization measures in various areas of
telecommunications and broadcasting, including the abolition of the KDD Law, the
forthcoming abolition of the "100 destination rule", improvements in
interconnection liberalization on cable providers, modification of accounting rates, and
the liberalization of foreign investment.
We have had a very
constructive discussion of Japan's economy and trade policies, which has been held at a
difficult time for Japan and the world economy. Many participants have emphasized the
importance of market opening and deregulation as well as Japan's role in assisting the
resolution of the Asian financial crisis.
deregulation and market stimulation - leading to more open markets - have been common
themes running through this TPR discussion. The Japanese economy was, in earlier days, a
major engine of world trade and investment and the TPRB has clearly expressed the hope
that Japan can again effectively assume this role through its economic recovery and the
positive effects of deregulation.
All participants have
recognized Japan's strong and active participation in the WTO system and the importance
attached by Japan to MFN treatment has been welcomed. We hope that Japan will respond
positively, as they have undertaken, to the large number of specific or bilateral concerns
raised during this meeting by various Members. Back to top