The Japanese business community believes it is important to reduce the high tariffs that are still being imposed not only by developing countries but also by developed countries upon some products. (For example, the EU's tariffs on motor vehicles and electronic products are 10 and 14 percent, and the United States imposes a 25 percent tariff on commercial vehicles, respectively.) This is why Nippon Keidanren basically supports the proposal for application of the Swiss formula. A simple formula is preferable, as this would clearly identify the method being used to reduce tariffs, and would facilitate comparisons among participating countries. Nippon Keidanren does not support the Girard formula, or some variation thereof, because tariff cuts would be relatively small for countries with high average tariffs, and therefore it would not correct tariff differentials among participating countries.
In order to promote the participation of developing countries in formula-based tariff cutting measures, flexibility provisions should be given to the particular needs of Members (as called for in paragraph 8 of Annex B, July 2004 Package). In addition, the formula itself should be flexible by applying different coefficient to developing countries.#1
Conditions that take into account the particular needs of developing countries and the need for flexibility should be established according to trade volumes, trade structure and the stage of economic development.
Each member has difficulties in reducing tariffs on some products (for example, Japan finds it difficult to reduce tariffs on forestry and marine products). However, it is important that all participating countries, including Japan, promote the progress of negotiations.
Now that some progress has been made in previous sectoral negotiations, Nippon Keidanren supports multilateral efforts both by governments and business representatives to eliminate or harmonize tariffs for specific sectors, in parallel with the above mentioned formula approach.
Nippon Keidanren supports harmonization and a zero-for-zero approach with regard to motor vehicles, automotive parts, consumer electronics including digital consumer products, consumer household appliances and office machines, and their components and parts, and chemicals, and also supports harmonization for textiles.
Every effort should be made to achieve, among a critical mass of Members, an agreement on the above sectors, in order to raise the effectiveness of the sectoral approach.
It is important that non-tariff barriers (NTBs) be eliminated as much as possible, in order to further improve market access beyond what is achieved through tariff reductions. In addition, the focus on NTBs issues discussed in the NAMA negotiations should be identified promptly, so as to avoid duplication with similar issues which should be discussed in such other negotiations as trade facilitation.
Some Members arbitrarily or improperly classify a product so that it falls in a tariff line that draws high duties. This type of practice should be prevented. As a case in point, some new products have multiple functions thanks to technological advances in the IT and home appliance industry, and this has given some Members an opportunity to apply the classifications arbitrarily.#2 In order to cope with rapid development of technology invention, a discussion on classification should begin at the NAMA negotiation. It is also important to expand the range of items covered by the Information Technology Agreement (ITA), to change the classification framework and to increase the number of signatories to the ITA.
Service sectors such as financial services, IT, e-commerce and distribution are essential infrastructure for economic development and play a key role in the establishment of integrated supply chains. Members should liberalize trade in services, with a view to obtaining maximum advantage from liberalized trade in goods and investment.
It is encouraging that, since the July 2004 Package, a number of joint declarations have been issued by "Friends Meetings," all calling for more liberalization.
On the other hand, some Members are participating in trade in services negotiations while keeping an eye on the extent of progress in other areas, especially agriculture and non-agricultural market access. However, because of the advantage of liberalizing trade in services, Members should take an active role in pushing forward with trade in services negotiations, regardless of the state of other negotiations.
(a) Domestic regulations
Nippon Keidanren urges all countries to avoid introducing regulations that limit trade unnecessarily, and to improve the transparency of their domestic regulations by, for example, ensuring the transparency of licensing conditions and introducing public comment mechanisms.
(b) Emergency Safeguard Mechanisms (ESM)
Safeguard mechanisms should not be introduced for the following two reasons: First, the positive list approach permits Members to choose, in consideration of their own circumstances, which service sectors they will liberalize. Secondly, it would be next to impossible to objectively determine a loss to a specific domestic industry caused by a rapid increase in imports since it would be technically difficult to measure the volume of trade in services.
In principle, most favored nation treatment exemptions were scheduled to be eliminated within 10 years of implementation of the GATS. This year marks the 10th anniversary of its implementation, and Nippon Keidanren looks forward to seeing efforts to eliminate such exemptions.
The deadline for submitting revised offers was the end of May 2005, and Nippon Keidanren now urges all Members who have not yet submitted offers to do so promptly, and to participate in discussions targeting higher liberalization levels. In light of the fact that many Members have still not submitted even initial offers, those who have submitted them (mainly developed countries) should strengthen their efforts to urge developing countries to do so, and should take the lead in negotiations while giving careful considerations to the areas of interest of developing countries.
Furthermore, to promote negotiations on trade in services, discussions should focus on further strengthening the effectiveness of "Friends Meetings," and at the same time, to identify priority sectors and seek critical mass approaches in these sectors. It may also be worth while to adopt some form of indices to objectively measure the extent of negotiation progress.
(a) Horizontal issues
(i) Investment
The provision of services through Mode 3 (a commercial presence abroad) is an essential function of companies involved in trade in services. Furthermore, investment in the service industry is closely linked to investment in the manufacturing industry in term of supply chains. For these reasons, and also to strengthen the competitiveness of manufacturing industries in host countries, a high level of liberalization for services provided through Mode 3 should be achieved.
(ii) Movement of natural persons
Smooth, unhindered international movement -- whether the movement of goods, services, people, capital, or information -- leads to efficient business activities, but the movement of natural persons has not been liberalized as much as the movement of other such resources.
Nippon Keidanren therefore calls for the establishment of a regime that enables the unhindered worldwide movement of highly skilled natural persons involved in specialist and technical fields. Nippon Keidanren calls especially for Members to make liberalization commitments in the following areas: (a) all intra-corporate movements, including those of executives, directors, managers and specialists, and those for the purpose of education, training and skill development; (b) movements based on the individual contracts or on contracts between corporations of natural persons working in specialized or technical fields; and (c) temporary stays.
The movement of natural persons is being negotiated as one mode of trade in services, but since highly skilled persons occupy other fields in addition to trade in services, Nippon Keidanren calls on Members to open their doors to highly skilled persons in all fields. Nippon Keidanren also calls on Members to go beyond their schedules of specific commitments to ensure the transparency, simplification and expedition of their immigration regulations and procedures.
(b) Sectoral issues
(i) Financial services
Nippon Keidanren urges all Members to improve the content of their schedules based on the Understanding on Commitments in Financial Services. In particular, Members should abolish all discriminatory measures functioning as actual barriers that impede the entry of foreign financial institutions in various financial service sectors, including but not limited to foreign capital ratio restrictions, restrictions on the establishment of branches and subsidiaries, nationality or residence requirements for directors and employees, geographical limitations, restrictions on scope of business, restrictions related to reinsurance (such as mandatory cessions to specified insurance or reinsurance suppliers), and economic needs tests.
(ii) IT-related services / e-commerce
Nippon Keidanren strongly urges Members to move forward with: (a) full liberalization in computer-related services and value-added telecommunications services; (b) liberalization to promote development of emerging business models in conjunction with technological advancement, (c) submission of offers of full liberalization for IT-related services indicated in requests from the Japanese government, considering all such services as computer-related services; and (d) making their comprehensive commitments including all the sectors / sub-sectors of existing classification rules taking into account that IT-related services are conducted through combinations of sectors in the specific commitments classification table. In spite of the fact that the deadline for revised offers has passed, negotiations should proceed along the lines of existing classifications, to avoid the confusion that would arise by trying to deal with new classification issues.
With regard to telecommunications services, Nippon Keidanren calls on Members to liberalize schedules of specific commitments based on the Basic Telecommunications Agreement. In particular, impediments such as restrictions on foreign capital ratio and discriminatory domestic regulations should be eliminated, and transparency in licensing requirements should be ensured. Furthermore, the Reference Paper should deal only with basic telecommunications services, and not added-value telecommunications services.
With regard to computer-related services, Nippon Keidanren urges Members to comprehensively liberalize all sub-sectors and modes. IT services using computers and network facilities should be classified as computer-related services and therefore liberalized.
Newly emerging services spanning multiple sectors should be liberalized, in accordance with existing commitment schedules, through full liberalization commitments for basically all related sectors (such as computers, telecommunications, and consulting services).
(iii) Maritime transport services
Member countries should commit to a high level of liberalization of maritime transport services, as called for in a joint statement issued by 41 countries in February 2005. It is also important that Members liberalize international maritime transport services and maritime auxiliary services, and ensure non-discriminatory access to and use of port services.
(iv) Air transport services
With regard to the three so-called soft rights areas -- selling and marketing of air transport services (with the exception of pricing), computer reservation system services, and aircraft repair and maintenance -- Nippon Keidanren urges all Members to implement their schedules of specific commitments.
(v) Energy services
During negotiations, it is vital to strike a balance between public interest aspects such as ensuring energy security, high supply credibility, and the provision of universal services on the one hand, and greater efficiency on the other. Agreement on classification issues should be reached as soon as possible.
(vi) Distribution services
Nippon Keidanren calls on Members to relax restrictions on foreign ownership, restrictions on the establishment of a commercial presence, and restrictions on use. As the service industry is inseparable from the manufacturing industry, to ensure free distribution of both self-produced products and non-self-produced products is particularly important to strengthen international competitiveness.
(vii) Audiovisual services
Even some developed countries have implemented almost none of their commitments. Nippon Keidanren calls for substantial improvements to Members' schedules of specific commitments. It is especially important that domestic regulations discriminating against foreign service suppliers be relaxed.
(viii) Construction and engineering services
Nippon Keidanren calls on Members to liberalize restrictions on foreign capital ratio, restrictions on business forms, and domestic regulations that discriminate against foreign service suppliers.
Further advances in digitalization and globalization will promote the development of new business models and the evolution of trade patterns. For this reason, too, Members should take comprehensive, targeted steps to liberalize their IT and e-commerce sectors, and to establish non-restrictive rules#3. It is important that developed countries also support the efforts of developing countries as they work to computerize their own societies and eliminate the digital divide.
With regard to the treatment of software, Nippon Keidanren urges that GATT provisions also be applied to online/electronic/digital transactions#4 because, although such transactions use the Internet rather than a physical medium,#5 they are similar to other trade transactions. At the very least, the same levels of liberalization should be secured. Nippon Keidanren also calls for the relevant authorities to announce without delay that the moratorium of customs duties on online/electronic/digital transactions be made permanent.
Trade facilitation benefits all those involved in trade, because it reduces the burden placed on corporations and boosts the administrative efficiency of governments. For these reasons, trade facilitation should be vigorously promoted.
Since the July 2004 Package, Japan and other Members have respected the Work Plan adopted in November that year by submitting concrete proposals regarding GATT Articles V (Freedom of Transit), VIII (Fees and Formalities connected with Importation and Exportation), and X (Publication and Administration of Trade Regulations).
Nippon Keidanren supports these proposals,#6 because they generally target the removal of difficulties faced by the business community. The Japanese business community attaches a great importance to adoption and publication of a system that ensures administrative procedures will be completed within a standard number of days, in light of the improving transparency of custom procedures#7.
Nippon Keidanren looks forward to Members promptly developing a common understanding with regard to major rules covered in their proposals#8, and to their agreeing to make those rules obligatory under an agreement.
Developed countries should give assistance to promote capacity building of developing countries in exchange for developing countries' positive participation in establishment of trade facilitation rules. Furthermore, flexibility will be required when considering the referral of a dispute to a settlement body, as in the case of non-compliance due to a lack of capacity.
Arbitrary, or protectionism-oriented antidumping measures have been implemented frequently in recent years, and such measures are becoming increasingly common not only in developed countries but in developing ones as well. Abuses of antidumping measures reduce the effectiveness of market access improvements, and harm exporters as well as users and consumers in importing countries. The imposition of antidumping measures greatly diminishes predictability and creates uncertainty in the multilateral trading system. To prevent such problems, the Antidumping Agreement should be revised and rules should be tightened and clarified, to ensure that any antidumping measure is rational, fair, compliant with due process, and predictable.
In the July 2004 Package, Members committed themselves to promoting antidumping negotiations, and substantive discussions based on Members' proposals are now in progress to negotiate rule content. In February 2005, Japan and other Friends of Antidumping Negotiations proposed six broad-based objectives#9 that they would like to see achieved through negotiations.
The Japanese business community strongly requests that antidumping rules should be revised as follows, in line with the above-mentioned objectives.
First of all, it is extremely important that antidumping measures should not be permanent, and that the principle of terminating any antidumping duty within five years (sunset principle) be rigorously upheld. This would ensure that, if an unjustifiable antidumping measure is implemented, at least it would be terminated within a set period of time, making it possible to deal with the measure and predict cost.
Secondly, in order to mitigate the excessive effect of an antidumping measure (especially harm to users and consumers in importing countries), it is necessary to ensure (a) that such a measure does not harm the public interest, (b) that the lesser duty is imposed (i.e., if the margin required to avoid injury to the domestic industry is less than the dumping margin, the duty imposed should be the lower, injury-avoidance margin), and (c) that procedures are revised, so that opinions of users and consumers are more effectively reflected.
Thirdly, ensuring a quick end to unjustifiable investigations is vital, in order to mitigate negative effects on the company under investigation and domestic users. In many cases, imports are virtually halted when an investigation begins or when a provisional decision is given, so an unjustifiable initiation of an investigation or an unjustifiable provisional decision can cause so much injury that the company is unable to resume business at a later date. To avoid this, the targeted item(s) should be clearly specified, and the company which may be subjected to an investigation should be given an opportunity to express its opinion before a decision is made on whether to initiate an investigation (or at least before a cost/price investigation is initiated), to give it an opportunity to verify matters such as whether the applicants are qualified to request an investigation. In addition, further intensive discussions should be held on the timing of the introduction of provisional measures, to ensure that the time period between initiation of an investigation and the introduction of provisional measures should not be unjustifiably too short.
The Friends of Antidumping Negotiations have proposed many improvements targeting the tightening and clarification of rules, and Nippon Keidanren looks forward to seeing those improvements made.
Developing countries should be keener to participate in DDA negotiations if they are aware that participation in the multilateral trading system offers them distinct advantages. Trade liberalization and the establishment of trade rules not only accelerate economic growth and efficiency thorough trade expansion but also encourage capital inflows and technical transfers that create more job opportunities.
Developed countries should give due consideration to the interests of developing countries, encouraging their participation in the WTO process to ensure substantive progress in the DDA negotiations.
To achieve these aims, first of all, developed countries should make stronger efforts in areas of interest to developing countries, such as liberalization of the movement of natural persons, more open markets for agricultural products and reduction of subsidies in agriculture. Secondly, developed countries should give serious and positive consideration to developing countries' proposals regarding special and differential treatment (S&D), and regarding implementation issues (reduced obligations without negotiations).
It is time for WTO Members to begin substantial discussions on the issue of developing countries graduating from S&D treatment (termination of S&D treatment for a developing country which has the ability to implement obligations imposed by WTO agreements).
It is also important to provide technical assistance (capacity building measures) that will raise the ability of developing countries to abide by trade rules and participate in the negotiating process. Technical cooperation activities implemented by the WTO Secretariat include capacity building seminars and workshops, and Nippon Keidanren welcomes these initiatives. Japan's official development assistance (ODA), offered through coordination of the public and private sectors, provides technical support in Asia, Africa and elsewhere, and Nippon Keidanren supports the continuation of such programs. Japan's ODA Charter places priority on achieving sustainable growth, and the Charter's commitment to assistance for trade and investment is laudable. Japan's ODA should also prioritize measures ensuring that developing countries abide by trade rules and build their capacity to participate in trade negotiations, including DDA negotiations. The Japanese business community is willing to offer private-sector know-how and experience to assist developing countries as they take steps to improve their business circumstances.