[ Nippon Keidanren ] [ Policy ] [ Index ]

Urgent Recommendations
Toward the WTO Cancún Ministerial Conference and Beyond

[ Recommendations by Sectors ]

Priority Issues for Nippon Keidanren

1. Creating Investment Rules

Nippon Keidanren places one of its top priorities on the creation of international investment rule. Because multilateral investment rules can be reviewed and augmented at future Round negotiations, they have the potential to make a greater contribution than bilateral investment treaties (BITs) to ensuring the stability, transparency and predictability of investment environments.

WTO negotiation on investment rules are scheduled to begin following agreement by all Members at the Cancún Ministerial Conference. The Working Group on relationship between trade and investment is currently considering individual issues identified in the Doha Ministerial Declaration, and in December 2002, a report that sets out the progress made up to that date was submitted to the General Council.

Nippon Keidanren considers the Working Group should be given effective status as a forum for pre-negotiations, and as such, has urged that it conduct substantive negotiations. Nippon Keidanren strongly urges that agreement to start negotiations regarding investment rules based on the findings of the Working Group up to the time of the Cancún Ministerial Conference be reached at the Cancún Ministerial together with other Singapore issues, and that these negotiations be concluded by the deadline stated in the Doha Declaration.

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. While the fact that GATS coverage of direct investment by the service industry in Mode 3, Members should establish standard industrial categories, and then consider the possibility of introducing the GATS liberalization formula into non-service industry areas. For further details, please refer to Nippon Keidanren's July 2002 position paper, Towards the Creation of International Investment Rules and Improvement of the Japanese Investment Environment.

2. Liberalizing the Movement of Natural Persons (MNPs)

Nippon Keidanren first calls for the establishment of a regime that enables the unhindered movement throughout the world of highly-skilled natural persons involved in specialist and technical fields. Regarding the movement of such persons, Nippon Keidanren has particularly keen interests in: (1) all intra-corporate movement, including executives, directors, managers, and specialists, and those for the purpose of education, training and the development of skills; (2) movement based on individual contracts of natural persons working in specialized and technical fields; and (3) temporary stay. All Members are called upon to make specific commitments to enable such movements. Nippon Keidanren proposes that intra-corporate transferees be defined as "the temporary movement of natural persons among headquarters, overseas offices and branches, subsidiaries and affiliated corporations."

The movement of natural persons is being negotiated as one of the modes of trade in services, i.e. mode 4, but since these highly-skilled persons are not limited only to fields governed by trade in services, Nippon Keidanren calls for Members to open their doors to highly-skilled persons in all fields including services. Developed countries should also positively consider the liberalization of movement of unskilled workers, if necessary, setting quantitative restrictions based on economic needs tests. At the same time, developed countries should maintain domestic institutional infrastructure towards the movement of unskilled workers.

Although the initial offers of many Members with regard to trade in services negotiations are still inadequate, the EU has taken the lead in making commitments by identifying contracted services suppliers in its schedule of specific commitments, and enabling intra-corporate transfers for the purpose of graduation trainees without requiring economic needs test. Nippon Keidanren welcomes these measures, and calls for Japan and other developed countries to follow the example set by the EU and endeavor to improve their own schedules of specific commitments further.

Nippon Keidanren also calls for Members to go beyond their schedules of specific commitments to ensure the transparency, simplification and expedition of their immigration regulations and procedures. For further details, please refer to Nippon Keidanren's June 2002 position paper entitled Trade in Services Negotiations on the WTO - Proposal Concerning the Movement of Natural Persons.

Nippon Keidanren is proceeding with its consideration of the issue of entry of foreigners to Japan and plans to issue a paper by March 2004 at the latest, that introduces its position on the following: (1) the establishment of social systems for the acceptance of foreigners; (2) facilitation of the movement of highly-skilled natural persons in specialized and technical fields in accordance with globalization of business; (3) reform of employment contracts, personnel management, and organizational administration of Japanese companies; (4) expansion of foreign student acceptance and promotion of their employment in Japan; (5) improvement of training and skills development systems in line with corporate needs; and (6) promotion of the acceptance of foreign workers in fields of employment in which demand exists due to a shortage of Japanese workers.

3. Other Important Items

(1) Promoting Trade in Services Negotiations

Nippon Keidanren recognizes not only that services, as business infrastructure as well as important business activities, contribute to global economic growth but also that liberalization of trade in services is not sufficient enough to exploit its full potential.

[ Evaluation of the Current Situation ]

Trade in services negotiations began at the start of 2000 under the Built-In Agenda (BIA), and were integrated into the Doha Development Agenda at the Doha Ministerial Conference held in November 2001. The deadline for submission of initial requests was the end of June 2002, and for initial offers, the end of March 2003. Judging from the number of initial offers submitted, as well as their contents, it would be difficult to say that much progress has been made on liberalization, particularly in developing countries, and Nippon Keidanren strongly urges the WTO Members to submit requests and offers before the Cancún Ministerial Conference.

[ Overview ]

Nippon Keidanren regards the Cancún Ministerial Conference as a venue for the interim review of trade in services negotiations, and has high expectations of their development into increasingly substantive and extensive negotiations. Movement of natural persons and e-commerce are dealt with in section A.2. and section A. 3.(4) respectively, because they are horizontal issues beyond the reach of trade in services.

A) Request and Offer Negotiations
  1. Raising the level of Japan's liberalization
    None of the items in the initial offer submitted by Japan go beyond the bounds defined by existing domestic laws. Among the requests to Japan submitted by other countries, there are measures that Nippon Keidanren would also very much like to see liberalized. In particular, Nippon Keidanren urges the Government of Japan to implement further liberalization where the cross-cutting issue of movement of natural persons is concerned.

  2. Raising the level of liberalization of other developed countries
    While other developed countries and regions such as the U.S., EC, Canada, Australia, New Zealand, Switzerland and Hong Kong have also submitted initial offers, not only most of the items contained go no further than the bounds permitted by existing domestic laws, but there are also areas in which no liberalizations beyond those listed in their schedules of specific commitments have been offered. Nippon Keidanren shall urge that other countries, as well, substantially raise their levels of liberalization, both through lobbying the Government of Japan to raise the issues in bilateral negotiations, and through direct lobbying. MFN exemptions should not exceed a period of ten years in principle, Nippon Keidanren calls for their prompt abolition.

  3. Raising the level of liberalization of developing countries, and prompt submission of initial offers
    Nippon Keidanren calls on the many developing countries that have yet to submit initial offers to do so promptly, and shall also strengthen its lobbying efforts with regard to countries whose initial offers do not contain substantive liberalizations, seeking to convince them of the benefits of liberalization of trade in services. Nippon Keidanren calls for abolition of MFN exemption wherever possible.

B) Rules
  1. Domestic regulation
    Nippon Keidanren urges that all countries endeavor to improve the transparency of their domestic regulations, and desist from introducing regulations that require not more burdensome than necessary to ensure the quality of services. From this viewpoint, Nippon Keidanren gave its full backing to the paper submitted by the Government of Japan at the Working Party on Domestic Regulation in March 2003, and calls for accelerated negotiations based on that paper. The subject of transparency in domestic regulation is also addressed in section A.3.(6) of the current paper.

  2. Emergency Safeguard Measures (ESM)
    With regard to applying ESM to trade in services, there is little choice but to recognize the technical difficulties of accurately measuring trade in services. Therefore, Nippon Keidanren do not see any need for the ESM for trade in services in the foreseeable future.

[ Main Sectors ]
A) Financial Services

Nippon Keidanren urges all member countries to improve their Schedules based on the 'Understanding on commitments in financial services'. In particular, Member countries should abolish all the discriminatory measures functioning as actual entry barriers for foreign financial institutions in various financial services sectors including but not limited to foreign capital restriction, restriction in establishing branches or subsidiaries, nationality or residence requirement on directors or employees, geographical limitation, restriction on scope of business, economic needs test etc.

B) IT-Related Services / e-commerce

Nippon Keidanren urges Members (a) to commit full liberalization in computer-related services as well as value-added telecommunications services, (b) to commit liberalization to promote development of emerging business models in conjunction with technological advancement, (c) regarding the example of IT related services attached with the requests by the Government of Japan, to submit offers of full liberalization as computer-related services, (d) to make their comprehensive commitments including all the sectors / sub sectors of existing classification rule , taking a fact that IT-related services are conducted through combinations of sectors in the specific commitments classification table into account.
Regarding the telecommunications services, Nippon Keidanren calls for the Members to liberalize schedules of specific commitments based on the Basic Telecommunications Agreement. Especially, such impediments as restrictions on foreign capital investment and discriminatory domestic regulations should be eliminated as well as transparency in licensing requirements should be ensured.
Regarding the computer-related services, Nippon Keidanren urges Members to liberalize all the sectors as well as sub-sectors comprehensively. IT services that take advantage of computers and network facilities such as web-hosting, data center, application management and outsourcing services, should be classified as computer-related services for liberalization commitment.
Newly emerging services such as online banking service via web-hosting, should be liberalized through full liberalization commitments of all the related sectors.

C) Maritime Transport Services

Despite the fact that maritime transport services are an important common infrastructure for a wide range of trading business, it is not covered by the GATS rules. In March 2003, 52 WTO Members issued a joint statement calling for the participation of all Members in negotiations on maritime transport services. Nippon Keidanren fully supports this statement. Members need to make efforts in particular to liberalize international maritime transport services and maritime auxiliary services as well as to ensure non-discriminatory access and use of port services.

D) Air Transport Services

Nippon Keidanren urges all Members to implement their schedules of specific commitments and to make new commitments with regard to the three so-called "soft right" areas, and is of the opinion that consideration of such services as ground handling and airport management currently not covered by the GATS is also important. Concerning "hard right" services, the international regime based on bilateral agreements should be maintained.

E) Energy Services

Nippon Keidanren fully recognizes the importance of liberalization of trade in energy services, and welcomes any progress in negotiations regarding market access and national treatment. Nonetheless, it is vital to strike a balance between such public interest aspects as ensuring energy security, high supply credibility, and the provision of universal services on the one hand, and greater efficiency on the other. Members need first to discuss the issues of classifications when entering negotiations on the requests and offers submitted.

F) Other Sectors
  1. Distribution Services:
    Nippon Keidanren calls for the liberalization by all Members of restrictions on the foreign ownership, and the establishment of commercial presence as well as restrictions of use.
  2. Audiovisual Services:
    Even among developed countries, there are some which have implemented almost none of their commitments, and Nippon Keidanren calls for substantial improvements to Members' schedules of specific commitments. The relaxation of domestic regulations that discriminate against foreign service suppliers is particularly important.
  3. Construction and Engineering Services:
    Nippon Keidanren calls for the liberalization by all Members of restrictions on foreign capital ratio, business forms and domestic regulations that discriminate against foreign service suppliers.
  4. Professional Services:
    Nippon Keidanren calls for the relaxation by all Members of nationality and professional experience requirements.

(2) Improving Market Access for Non-Agricultural Products

Remaining industrial tariffs and non-tariff barriers must be substantially reduced to open the way for efficient resource distribution through unimpeded exports and imports, and economic development driven by free trade.

The negotiation on Market Access for Non-Agricultural Products are underway by the Negotiating Group, and the Group's first proposal on the draft elements of the modalities was issued in May 2003. However, objections to these proposals were submitted by both developed and developing countries, and were unable to reach the agreement on modalities by the May 31 deadline.

Nippon Keidanren strongly urges that agreement on the modalities be achieved at the Cancún Ministerial Conference, and calls for extra effort on negotiations to this end.

Nippon Keidanren's positions regarding the Group's proposal, and its requests with regard to agreement on the modalities, are as follows.

A) Formula

Both developed and developing member countries should adopt formulas that result in similar substantive reductions in tariffs, especially high tariffs. The Group's proposal advocates a formula that resembles the Swiss formula, but because it incorporates an average of the base rate in its formula, reductions by those Members whose average of the base rates is high will be smaller than desired. Developing countries whose tariffs are generally high may not as such feel obliged to make special efforts to reduce them, as a result of which disparities between tariffs of individual members would fail to be redressed. Also, there is a possibility that little tariff reduction would be made depending on the coefficient which would be determined by coming negotiations.
Nippon Keidanren notices the difficulty of the reduction of tariffs for forestry and fishery products, footwear and leather goods, but considers that it is important for Members including Japan to move the negotiation forward by the taking appropriate means.

B) Sectorial Tariff Elimination

Nippon Keidanren urges the adoption of sectorial approaches in conjunction with tariff reduction formulas, and proposes that reduction or elimination of tariffs be considered for the following sectors: consumer electronics and electric appliances (including digital consumer electronics products) and parts thereof, motor vehicles and parts thereof, office equipment, bicycles, rubber and articles thereof, glass and articles thereof, ceramic products, cameras, watches, toys, certain articles of iron or steel, electrical machinery parts, titanium and articles thereof, construction equipment, paper, and bearings. Nippon Keidanren advocates "Harmonization" for the textile and chemicals sector.
Given the rapid advances and merging of boundaries in IT-related technologies and services, expanded membership of the Information Technology Agreement (ITA) should be sought and tariffs eliminated on a wide range of goods.

C) Supplementary Modalities

Nippon Keidanren welcomes proposals from the Negotiation Group for supplementary measures mediated by such modalities as zero-for-zero, harmonization, and request-offer to be implemented after elimination of tariffs through formulas and sectorial approaches. Nippon Keidanren considers the elimination of all tariffs of 3% and under to be important.

D) Non-Tariff Barriers

Utmost efforts should be made to eliminate remaining non-tariff barriers (NTBs) and enable both domestic and foreign-owned companies to conduct business activities freely. From such a standpoint, Nippon Keidanren welcomes the Group's proposal to proceed with the identification and examination of the various types of NTBs, and negotiations based on such modalities as request/offer, horizontal, and vertical approaches. When considering the elimination of NTBs based on request/offer and sectorial approaches, however, care should be taken to maintain consistency with elimination of tariff barriers.
Developing countries should first lift their HS Code cover rates to 100 percent. Tariff reduction and elimination would be the best course, whilst 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.

(3) Improvement of the Antidumping Agreement

Nippon Keidanren welcomes the growing worldwide acceptance of its view that the spate of arbitrary, protectionist antidumping measures imposed in recent years has had the effect of destabilizing international trading system, and has hurt not only exporters, but also user industries and consumers. Strengthening the disciplines of the Antidumping Agreement would prevent the imposition of antidumping measures that undermine the effects of tariff reductions, and promote the exports of developing countries.

Negotiations are underway on the improvement of the Antidumping Agreement as one of the items on the agenda of the Negotiation Group on Rules, and in view of the smooth progress being made, in-depth negotiations on a concrete proposal for a revised agreement based on the paper submitted by Japan and other interested Members should commence shortly.

Nippon Keidanren welcomes such progress, and strongly urges that seamless continuation of negotiations for the revision of the Agreement after the Cancún Ministerial Conference.

Nippon Keidanren shares the same concerns as the interested Members for all 33 items presented in the joint papers, and is of the opinion that a substantive amendment of the Agreement is essential. Nippon Keidanren considers that the detailed joint papers prepared by interested Members regarding sunset, review and facts available should serve as a basis for substantive modification of the Agreement, and looks forward to the presentation of such proposals for the other items, as well.

As a general rule, it is essential that the procedures employed in the imposition of any antidumping measure are rational, fair and with due process. Nippon Keidanren calls for a wide-ranging review of all items, and particularly those concerning procedures, including those employed in: (1) calculation of dumping margins; (2) injury determination; and (3) investigation, review and other procedures. It also calls for following items not covered in the joint paper of interested Members be discussed: (1) material retardation of the establishment of domestic industry; (2) timing of application of provisional measures; and (3) clarifications of rules concerning the relationship with safeguard measures.

(4) Encouraging the Development of E-Commerce (issues related to WTO Work Programme on e-commerce )

The DDA that aims to promote international free trade has an important role to play in encouraging the sound development of IT and e-commerce in.

The immediate issues in the IT and e-commerce area are: (1) making an agreement of classification issue such as the treatment of software in a trade context, (2) securing market access and national treatment for new IT and e-commerce related businesses expected to emerge in conjunction with technological advances and (3) both developed and developing countries facilitate to make an international agreement to have vital policy measures for the sound advancement of IT and e-commerce. It is hoped that significant achievement would be reached in those area.

Towards and at the Cancún Ministerial Conference, Nippon Keidanren urges to show a strong initiatives of WTO member countries to have a revitalization of the WTO work program on e-commerce aimed at promoting discussion mainly on cross-cutting issues.

Regarding the treatment of software, it is strongly recommended that the GATT should be applied to online/electronic/digital transactions (e.g. downloading), as we recognize formerly as the similar trading transactions as physical goods (e.g. CD-ROM).. At minimum, similar levels of liberalization should be applied after the replacement of its delivery measures from physical goods to online/electronic/digital network.

The moratorium on customs duties regarding online/electronic/digital transactions should be made permanent.

Nippon Keidanren believes that it is extremely important for the APEC Members and also the WTO Members to make constructive efforts to implement the objectives stated on the "Statement to implement APEC policies on trade and digital economy" which was agreed at Los Cabos, Mexico in October 2002.

(5) Creating Trade Facilitation Rules

Clarification, simplification and harmonization of trade procedures would benefit all those involved in trade, not only reducing the burden that such procedures impose on the business world, but also boosting administrative efficiency for Members. Virtually all Members indicated understanding for such benefits at the Doha Ministerial Conference.

Nippon Keidanren strongly urges that, based on the results of negotiation preparations currently being carried out by the Goods Council, agreement to launch the negotiations to create rules be reached at the Cancún Ministerial Conference together with other Singapore Issues, and that the negotiations be concluded by the deadline stated in the Doha Ministerial Declaration.

The rules to be drawn up should not be limited to customs procedures alone, but should rather apply to a wide range of trade procedures, and should be based on the basic principles of the GATT Articles such as transparency, legitimacy, predictability, minimum regulation and non-discrimination. Prompt action is needed particularly with regard to complicated and time-consuming customs procedures, unreliable tariff refund systems, and unclear trade rules and fees . The achievements of other international bodies such as APEC and WCO should also be consider while establishing the rules.

(6) Ensuring Transparency

Nippon Keidanren strongly urges Members to ensure transparency in domestic regulations. Such transparency, which should encompass all relevant aspects, including transparency of (1) processes involved in drafting regulations, (2) regulations themselves, and (3) the way in which regulations are applied, is vital not only to the elimination of all unnecessary barriers to global trade and investment, but also to guaranteeing the benefits of liberalizations by Members to daily business activities.

In the area of trade in services, Nippon Keidanren calls for the acceleration of the ongoing negotiations for the drafting of rules covering transparency, necessity and other aspects of domestic regulations, and also for the launching at the Cancún Ministerial Conference of negotiations concerning transparency in government procurement. As mentioned earlier, transparency is also a vital element of rules governing investment.

Regarding transparency, rules are already contained within the TBT and SPS Agreements, and Nippon Keidanren calls on the Members to voluntarily commit themselves to ensuring the transparency in domestic regulations covering all other areas of economic activity. In more concrete terms, Nippon Keidanren proposes that the following three steps be taken to increase transparency in line with Members' respective levels of economic development: (1) boost the transparency of legal systems; (2) create rules to redress discretion by regulatory authorities in regard to licenses, permission, etc.; (3) introduce public comment and petition systems with regard to the creation, amendment or elimination of domestic laws and regulations as well as government and ministerial ordinances. Nippon Keidanren maintains that domestic regulations should impose no more burden than necessary. (For further details, please refer to Nippon Keidanren's September 2002 position paper, Nippon Keidanren WTO Mission Position Paper.)

Other Relevant Issues

The following is the Nippon Keidanren's tentative views for the other relevant issues which are likely to or could be discussed at the Cancún Ministerial Conference.

1. Trade and Environment

Nippon Keidanren hopes for copious progress in the DDA where the issue of trade and environment is concerned.

With respect to the issue of multilateral environmental agreements (MEAs), negotiations on which are already underway, Nippon Keidanren supports the building of a common mutual understanding between the WTO rules and MEAs on specific trade obligations. With respect to liberalization negotiations for environmental goods and services, Nippon Keidanren is of the opinion that it will expand opportunities for supplying the technology which Japanese companies have developed and call for the acceleration of negotiations.

With respect to eco-labeling, Nippon Keidanren requests that the WTO decides how to handle the following two points in relation to eco-labeling at the coming Cancún Ministerial Conference: (1) clarification of the objects of discussion; and (2) clarification of aspects pertaining to eco-labeling under the TBT Agreement. (For further details, please refer to Nippon Keidanren's March 2003 position paper, Basic Positions on Trade and Eco-Labeling.)

2. The TRIPs Agreement and Public Health (Access to Medicines)

Nippon Keidanren recognizes that resolution of the issue of access to medicines is very important to developing countries that do not possess adequate capabilities for the manufacture of medicines, and calls for coordination between all concerned parties to ensure that progress toward a resolution is made at the Cancún Ministerial Conference.

3. Regional Trade Agreements

If new rules concerning regional trade agreements are drafted, Nippon Keidanren demands that these rules allow Japan to take a flexible approach toward RTAs, and that they apply to all existing regional trade agreements.

4. Trade and Competition

Nippon Keidanren takes a neutral position with regard to the drafting of international rules governing competition by the WTO, but calls for agreement to start negotiations on all four of the Singapore Issues.

5. Implementation of the TRIPs Agreement

Nippon Keidanren is concerned about the insufficient implementation of the TRIPs agreement in many Members, mainly in developing countries. Nippon Keidanren strongly urges that their Members, taking account of the work being done by WIPO for international harmonization of patent system, should take practical measures for the protection of intellectual property rights.

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