[ Nippon Keidanren ] [ Policy ]

Nippon Keidanren WTO Mission
Position Paper

(Provisional Translation)

11 September 2002

International Economic Affairs Bureau
Nippon Keidanren
(Japan Business Federation)

  1. Introduction
  2. Priority areas for Japanese business
    1. Trade in services negotiations
    2. Industrial tariff reductions
      (market access for non-agricultural products)
    3. Investment
    4. Antidumping
    5. Electronic commerce
    6. Trade facilitation
  3. Other key issues
    1. Trade and environment (WTO and MEAs)
    2. Intellectual property rights
    3. Agriculture
  4. Conclusion

I. Introduction

Amid increasingly vigorous cross-border flows of goods, services, information and people, the WTO system and its principles of free trade and non-discrimination have contributed enormously to boosting world economic welfare. In particular, further liberalization and the strengthening and development of rules within the WTO, as well as judicial dispute settlement using WTO dispute settlement functions, have become critical in ensuring the stability and predictability of cross-border economic activities.

Nippon Keidanren welcomes the launching of the new WTO round-the "Doha Development Agenda" (DDA)-at the WTO Ministerial Conference in Qatar in November 2001. In October 2001, immediately prior to the initiation of the new round, we dispatched a mission to the WTO, exchanging views with the WTO Secretariat and representatives of WTO member states. We took the opportunity to introduce the seven priority issues for Japanese industry (incorporation of the Built-In Agenda (BIA), industrial tariff reductions, development of international investment rules, review of the Anti-Dumping Agreement (Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994), promotion of the development of electronic commerce, promotion of trade facilitation, and stronger protection of intellectual property rights), seeking realization of these. We applaud the reflection of many of our wishes in the Doha Ministerial Declaration, as well as the wide-ranging scope of the negotiations.

At the same time, we understand that full reflection of developing country needs in terms of development will be vital in the new negotiations. Implementation of the Uruguay Round agreements is essential for both developing and developed countries, not least in maintaining the credibility of the WTO. To this end, it will be important to extend full support to developing countries in the form of, for example, capacity-building and technical cooperation. Japanese companies look forward to the WTO contributing to the sound development of the world economy through the DDA.

Nippon Keidanren calls for successful conclusion of the DDA by 1 January 2005. We will continue to cooperate together with the business organizations of other countries to ensure the success of the DDA from the perspective of the business world.

II. Priority areas for Japanese business

Responding to the launch of the new round, Nippon Keidanren has examined the current status of individual items under debate in the negotiations, presenting its own requests in regard to these.

1. Trade in services negotiations

* Current status

We welcome incorporation into the new round of the trade in services negotiations begun in 2000. Negotiations have now moved on to submission of initial requests by member states and substantive liberalization negotiations on individual areas. Japanese companies urge all countries to submit their initial offers by 31 March 2003 as scheduled, launching full request-and-offer negotiations.

* Requests

Given the current evolution toward high added value, the development of trade in services is essential for the world economy as a whole. We expect the results of the trade in services liberalization negotiations to contribute to service sector development in member states. Recognizing the importance of services negotiations as part of trade negotiations, Nippon Keidanren established the Japan Services Network in 1999 to support progress in the WTO trade in services liberalization negotiations. We look forward to the current trade in services negotiations enabling both developed and developing countries to enjoy the merits of trade in services liberalization.

(a) Cross-cutting issues
Nippon Keidanren emphasizes the following two points in particular in the current services negotiations.

(1) Movement of natural persons
With the advent of an age of global competition for human resources, liberalizing and facilitating the movement of personnel have become critical issues for business. Japanese companies are particularly interested in (i) intra-corporate movements #1, (ii) intra-corporate movement for training and skills development purposes, and (iii) Movement of highly-skilled professionals on a contract basis. In the new WTO round, we call for (i) improvement of member states' schedules of specific commitments, (ii) securing transparency in commitments and immigration control regulations and procedures, and (iii) simplification and acceleration of immigration control regulations and procedures. (See "Trade in Services Negotiations on WTO -Proposal Concerning the Movement of Natural Persons-" for details.)

#1 "In-house movements" is defined here as temporary movement of personnel among headquarters and offshore branches, subsidiaries and affiliates.

(2) Transparency of domestic regulations
From the annual questionnaires on trade in services which Nippon Keidanren has conducted around the world since 1999, it is clear that companies are facing problems with the arbitrary operation of and sudden changes to domestic regulations and the lack of transparency and rationality in licensing conditions and procedures.
We regret the lack of progress in discussions by the Working Party on Domestic Regulation on the transparency of domestic regulations pursuant to GATS Article VI:4. Even where member states make new commitments in the current negotiations, this will not lead to real liberalization in the absence of more transparent operation of domestic regulations. Accordingly, rules need to be created based on GATS Article VI:4, drawing on actual cases of impediment. Nippon Keidanren proposes that the following three steps be taken to increase transparency in line with members' respective levels of development.

Step 1: Boost the transparency of legal systems.
Enable access to all laws and government ordinances, the creation and announcement of investigation standards for licensing, etc., and documentation of oral guidance.
Step 2: Create rules to redress discretion by regulatory authorities in regard to licenses, permissions, etc.
Develop laws and regulations for administrative procedures (obligation to commence inspection, establishment and announcement of standard processing periods, disclosure of reasons for refusing licenses, permissions, etc.)
Step 3: Introduce public comment and petition systems in regard to the creation, amendment or elimination of regulations under domestic law or government and ministerial ordinances.

WTO member states should note that ensuring the transparency of domestic regulations will promote private-sector dynamism over the long-term and lead to the expansion of all types of business. At the same time, it will also be important to take into consideration the attendant administrative burden, undertaking capacity-building alongside negotiations to enable developing countries to develop domestic regulations and increase transparency.
In terms of the need for domestic regulations, we wish to see the concepts that regulations should impose no greater burden than necessary, and restrict trade no more than necessary, clarified through the work of the Working Party on Domestic Regulation, and then reflected in institution-building by member states.

(b) Sector-specific liberalization
We strongly request that sector-specific request-and-offer negotiations achieve the elimination of such restrictions in member states as (i) restrictions on foreign capital ratios, (ii) nationality and residence requirements for directors and employees, (iii) offshore remittance regulations, (iv) performance requirements (technology transfer, etc.) and (v) local procurement obligations on materials and services, thus improving market access. Nippon Keidanren has submitted a wide-ranging liberalization wish-list to the Japanese government regarding the creation of Japan's initial requests, including business services (particularly computer-related services), communications services, construction services and the related engineering services, distribution services, environmental services, financial services, transportation services, and energy services. We hope to see these requests realized in the request-and-offer negotiations.

(c) Other
While negotiations are being conducted on emergency safeguards, Japanese companies do not feel the need for safeguard measures in services areas.
However, we understand that developing countries need safeguards as emergency measures to alleviate sudden impacts on domestic industry. Where rules are created, we urge that these are made clear and objective so as to prevent the arbitrary exercise of safeguards, and that Mode 3 safeguards are excluded.

2. Industrial tariff reductions (market access for non-agricultural products)

* Current status

The questionnaire survey on tariff and non-tariff barriers for industrial products which Nippon Keidanren conducted in August drew more than 1,000 responses from 136 companies, identifying the reduction and elimination of the many high tariffs and diverse non-tariff barriers remaining in both developed and developing countries as an urgent task.
In the new WTO round, the Negotiating Group on Market Access is currently in the process of negotiations, to which Japan contributed a comprehensive paper in August. The EU, New Zealand, the United States and other countries have also submitted papers.

* Requests

To open the way for efficient resource distribution through unimpeded exports and imports and free trade-led economic development, the remaining industrial tariffs and non-tariff barriers need to be substantially reduced.
Japan, the US and the developed European nations should commit to zero tariff rates for all but certain sensitive products. In particular, we should agree to major reductions, including zero tariffs, for products with high tariffs of 10 percent or more (for example, US tariffs on commercial vehicles and textile products, and EU tariffs on AV machinery and automobiles). We welcome the sector-specific zero-zero concessions proposed by the Japanese government for consumer electronics products, rubber, and rubber products, etc. Remaining non-tariff barriers too should be eliminated to the greatest extent possible, guaranteeing unimpeded business activities by domestic and foreign companies.
Developing countries should, firstly, lift their HS Code cover rates to 100 percent. Tariff reduction and elimination would be the best course, but consideration must also be given to member states' respective stages of economic development and social policies. At the same time, Nippon Keidanren strongly seeks rectification of the lack of transparency in and instability of business-related regulations and procedures.
In regard to telecommunications-related products, expanded membership of the Information Technology Agreement (ITA) should be sought and tariffs eliminated on a wide range of goods, including digital consumer electronics products (flat-panel display color TVs, etc.) and all other electronics products.
We also want to see expansion of the membership of the Chemical Tariff Harmonization Agreement (agreement among Japan and 33 other countries on tariff reduction schedules for chemical products) and the elimination of nuisance tariffs (for example, low tariff rates of five percent or less).
Negotiations need to be accelerated toward reaching agreement on modalities at the end of May 2003.

3. Investment

* Current status

There are as yet no multilateral investment rules. At the same time, recent years have seen a rapid increase in the number of bilateral investment treaties (1,941 as at the end of 2000) and free trade agreements inclusive of investment. Japanese business places top priority on the creation of investment rules.
WTO negotiations on investment rules are scheduled to begin following agreement by all member states at the Fifth Ministerial Conference in September 2003. The Working Group is currently pursuing considerations on the individual issues identified in the Doha Ministerial Declaration.
In addition to papers submitted by Japan to the last three meetings of the Working Group, the EU, the Republic of Korea, Taiwan, Canada and Mexico have also submitted papers, with members participating actively in discussion.

* Requests

We strongly urge that, drawing on discussion at the Working Group, negotiations are launched at the Fifth Ministerial Conference on the basis of explicit consensus. Members should consider an investment framework which focuses on transparency and liberalization to the extent agreeable to developing countries, priority issues for Japanese business, giving full consideration to the development policies of these countries.
Bearing in mind GATS coverage of direct investment by the service industry in Mode 3, member states should establish standard industrial categories, and then consider the possibility of introducing the GATS liberalization formula into non-service industry areas.
More specifically, we believe that the following elements should be included in the framework.

  1. Definition: Direct investment and intellectual property rights
  2. Scope: All areas outside GATS coverage
  3. Transparency: Prompt announcement of investment-related domestic measures, including laws, regulations, administrative procedures and judicial decisions; administrative permissions and licensing procedures granted within a reasonable period based on objective criteria; non-discrimination; and establishment of transparent, timely and effective suit procedures, etc.
  4. Investment protection: Fair and equitable treatment and sufficient, ongoing protection
  5. Expropriation and compensation: Expropriation conditional on public interest purposes and the principle of non-discrimination, etc.; prompt compensation
  6. Free remittance: Guarantee of remittance in an internationally convertible currency
  7. Most-favored-nation treatment: Exceptions of up to 10 years, particularly for developing countries
  8. National treatment: Positive list formula, liberalizing only those areas in which countries have made commitments
  9. Market access: Positive list formula, liberalizing only those areas in which countries have made commitments
  10. Exceptions: Application of GATT Article XX (General Exceptions)
  11. Development provisions: Registration of certain measures as exceptions in the case of a reasonable request from a developing country based on development policy reasons; establishment of transition periods for developing countries for certain existing measures
  12. Dispute settlement procedures: Dispute settlement procedures among WTO members
  13. Relation to bilateral investment treaties: Registration of exceptions for existing BITs under certain conditions; but progressive extension of existing treaties to all member countries.

In addition, capacity-building in terms of capital and human resources needs to be pursued to encourage participation by developing countries, which comprise 80 percent of the WTO's membership.
We strongly urge that full negotiations are launched at the September Ministerial next year and incorporated as an essential component of the round. (See "Toward the Creation of International Investment Rules and Improvement of the Japanese Investment Environment" (July 2002) for details.)

4. Antidumping

* Current status

The number of antidumping cases has surged in recent years, while a far wider range of countries are imposing and instituting measures. In addition, the protectionist abuse of antidumping measures by some developed and developing countries has also become conspicuous. WTO negotiations are currently underway toward strengthening antidumping disciplines in order to maintain the stability of the international trading system.
Japan and 13 other countries submitted a joint paper to the May meeting of the rule negotiation group, followed by a joint paper from Japan and 12 other countries to the July meeting, identifying a total of 23 key issues. India, Brazil, Canada and the EC have also put forward proposals.

* Requests

We laud the clarification of many issues in the above joint papers. Nippon Keidanren strongly urges rectification of all 23 of the issues listed in the papers through amendment of the Antidumping Agreement.
A broad perspective should be taken in discussion, recalling that not only the parties filed against and related industries in the countries in question are injured by the abuse of antidumping measures, but also user industries and consumers in the importing nations.
Given that antidumping measures are recognized as exceptions to most-favored-nation treatment, Japanese business calls for disciplines to be clarified and strengthened in the negotiations to ensure reasonableness, fairness and appropriate procedures, with the prerequisite of maintaining the basic framework of the Antidumping Agreement. More specifically, we urge wide-ranging review of determination of dumping (AD Agreement Article II), determination of injury (Article III), investigation procedures (Articles V and VI), price commitments (Article VIII), imposition and collection of antidumping duties (Article IX), review of antidumping measures (Article XI), and dispute settlement (Article XVII), as well as all the items listed in the joint papers. Issues not included in papers submitted to date include (i) material retardation of establishment of the domestic industy, (ii) timing of the exercise of provisional measures, and (iii) clarification of rules concerning the relation with safeguard measures. We also wish to see these issues discussed and negotiated.
Member states need to submit proposals on specific agreement amendments by around spring next year, accelerating negotiations. (For details, see "Keidanren's Provisional Comment on "Preliminary UNICE Position on Anti-Dumping with a View to a New Round of WTO Multilateral Trade Negotiations" (April 2001) and the Keidanren proposal "Basic Position and Recommendations for the WTO Doha Ministerial Conference and a New Round of Negotiations" (July 2001)).

5. Electronic commerce

* Current status

The information technology (IT) and e-commerce areas have been demonstrating remarkable development on a global scale, including the emergence of new services using the Internet and IT, the widespread use of software downloads, and establishment of the practice of international online transactions via networks. The DDA has an enormous role to play in encouraging the sound development of IT and e-commerce in that it aims to promote international free trade. We call for the WTO principles of MFN treatment, national treatment and protection of intellectual property rights to be enforced through the ITA and other tariff-reduction negotiations, services negotiations, removal of non-tariff barriers, harmonization of rules such as international standards and conformance, and also the TRIPS negotiations, freeing up private sector-led international business activities. We also recognize the growing importance of the WTO and other international organizations working together to constrain moves which could impede international business development (for example, consideration of the introduction and strengthening of regulatory measures in regard to IT and e-commerce).

* Requests

The immediate issues in the IT and e-commerce area are (i) the treatment of software in a trade context (typical examples include digitalized goods, services, and downloaded software), and (ii) securing market access and national treatment for newly emerging business (for example, businesses combining both goods and services) in relation to IT and e-commerce, areas which are expected to continue to evolve. Based on this awareness, we urge the following.

(a) Moratorium on e-commerce duties
The imposition of duties on online digital content transactions has the potential to impede the free economic environment, and could also encourage tariff-dodging and spur market confusion. At the Fourth Ministerial Conference, members agreed to extend the moratorium on duties until the next Ministerial. However, we urge a permanent moratorium.

(b) Expansion of the Information Technology Agreement #2 (ITA)
The reduction of tariffs on IT products will expand demand for those products, and will also be indispensable in encouraging greater informatization in developing countries. We call for expanded WTO membership in the ITA. We regret that no progress has been made in discussion toward expanding coverage, and urge the earliest possible agreement in that regard. In particular, we request that all digital network products used in information communications, including e-commerce, are brought within the ITA. The addition of Internet and other functions in line with digitalization will turn audiovisual equipment such as televisions into effective e-commerce terminals in place of computers. Reducing and eliminating duties on these products will be vital in promoting the dissemination of e-commerce.

#2 Agreement on tariff reductions for IT-related products concluded at the Singapore Ministerial in 1996.

(c) Treatment in trade in services liberalization negotiations
In the trade in services liberalization negotiations, it will be important to achieve commitments to complete liberalization of the IT and e-commerce areas, particularly for computer-related services and consulting services. We call for negotiations to be conducted utilizing the following points as basic principles. (See "Requests on Information Technology and E-Commerce Issues at the WTO Services Negotiations" for details.)

  1. The same level of treatment should be secured for Internet and electronic modes of transaction as for transactions to which liberalization, MFN treatment, national treatment, prohibition of quantitative restrictions and other disciplines apply under the GATT framework for goods.
  2. The GATS positive-list formula is a moderate discipline allowing market access and national treatment reservations and the registration of MFN exceptions. However, to promote free e-commerce transactions, maximum commitments and disciplines should be sought.
  3. In terms of domestic regulations too, internationally harmonized rules should be created to promote liberalization and development of the international socioeconomy.
  4. IT and e-commerce are continuing to evolve as modes of business and are still in the process of international development. The traditional request-and-offer negotiation formula whereby existing barriers are identified and market access issues are taken up for discussion might not produce the desired results in this case because of the limited number of cases of impediment yet to emerge. Moreover, given the growth potential of this area, levels of commitment should be secured so as not to obstruct business development possibilities. Negotiations should be conducted in such a way as to encourage across-the-board liberalization in all countries with a view to promoting future development.

6. Trade facilitation

* Current status

Amid the global-scale division of the production process, trade facilitation has become a critical issue for Japanese companies, particularly in the manufacturing industry. Prompt rectification is needed particularly in regard to complicated and time-consuming customs procedures and unreliable tariff refund systems. It is therefore extremely unfortunate that, despite virtually all member countries indicating understanding of the merits of trade facilitation, consensus could not be reached on inclusion of the creation of basic trade facilitation rules in the Doha Ministerial Declaration.

* Requests

Simplification and harmonization of trade procedures, as well as the promotion of greater use of IT in these procedures, would not only reduce the burden which trade procedures impose on the business world, but would also contribute to boosting administrative efficiency in member states. We strongly call for agreement to be reached at the next Ministerial to launch rule-making negotiations, forming basic rules on trade facilitation as part of the DDA. Rules should address a wide range of trade procedures, including customs procedures, and should be based on the basic principles of the WTO Agreement (for example, GATT Articles V, VIII, and X) such as transparency, legitimacy, predictability, minimum regulation, and non-discrimination.
Because institution-building in developing countries and development of the operational environment for these institutions are essential factors in realizing trade facilitation which is truly meaningful to business, trade facilitation capacity-building will need to be undertaken in collaboration with other related international organizations (UNCTAD, World Bank, IMF, WCO).

III. Other key issues

1. Trade and environment (WTO and MEAs)

In the context of trade and environment, the Doha Ministerial agreed to negotiations on (i) the relationship between existing WTO rules and the "specific trade obligations" set out in multilateral environmental agreements (MEAs), (ii) procedures for information exchange between MEA Secretariats and the WTO Secretariat, and (iii) liberalization of environmental goods and services. These negotiations are of interest to Japanese business.

We recognize that liberalization negotiations for environmental goods and services will expand opportunities for supplying the technology which Japanese companies have fostered, and have high expectations for the results of these negotiations. We will follow the progress of negotiations closely in regard to the relationship between existing WTO rules and the "specific trade obligations" set out in MEAs. Trade-restricting measures based on MEAs which have garnered international consensus (e.g., the Montreal Protocol, Basel Convention and Washington Convention, etc.), should also be recognized by the WTO.

Japanese business has been taking a serious approach to global environmental issues toward sustainable development, and we will continue to examine the relation between trade and environment.

2. Intellectual property rights

The globalization of corporate activities has increased the ratio of world trade absorbed by products and services embodying intellectual property. Developing intellectual property rights (IPR) protection systems in developing countries is critical in maintaining a sound trading order.

The TRIPS Agreement provides for a transitional period up to January 2000 for developing countries and market-economy transition countries and up to January 2006 for least-developed countries. We call on those developing countries and market-economy transition countries whose transition period expired in January 2000 to work toward smooth implementation of TRIPS-related domestic systems. Regular reviews should also be undertaken of TRIPS conformance in new WTO member states, ensuring that member states share the same perception of the current situation.

Developed countries with IPR knowledge will need to strengthen assistance in regard to the relevant legal systems and execution systems, as well as citizen education and awareness-raising, in developing countries. We also request the WTO to devote resources to capacity-building in order to support TRIPS implementation in developing and least-developed countries, as well as in countries applying for WTO accession. The WTO should work with WIPO and other related institutions in this endeavor.

3. Agriculture

Nippon Keidanren has not at this point engaged in detailed considerations of the WTO negotiations on agriculture (market access, domestic support, export subsidies), but believes that the Japanese government should first seek to strengthen competitiveness through the reform of domestic agriculture policies. These reforms will open the way for major reductions in domestic subsidies through the elimination of price-support policies, as well as enabling tariffs on many products to be reduced and eliminated over the medium-term. We also urge that progress is made in discussion concerning the obligations of not only importing countries, but also of exporting countries, such as restrictions on export, etc. (For details, see the Keidanren (now Nippon Keidanren) recommendation, "Toward the Implementation of Strategic Trade Policies-A Grand Design of Japan's Policy as a Nation Built on Trade" (June 2001).)

IV. Conclusion

Japanese business looks to the DDA to contribute to the sound development of expanding world trade. In the new round, we call on WTO member states to engage in free thinking to open windows to new economic development, conducting negotiations based on recognition of the role of the private sector as the engine of economic dynamism. We also strongly urge cooperation from the relevant countries to ensure that not only developed countries but all WTO members-market-economy transition countries, developing countries, and least-developed countries-can enjoy the results of the negotiations.

Japanese business intends making full use of the fruits of the current mission to lobby domestically from a number of angles toward the success of the DDA, maintaining our utmost cooperation. We also intend to utilize the private-sector knowledge and know-how which Japanese business has built up over the years to actively contribute toward sustainable development, the alleviation of poverty, and other issues which should be addressed by the WTO.

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