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Challenges for the Upcoming WTO Negotiations and
Agendas for Future Japanese Trade Policy

Appendix 1
Tariff Reductions on Goods in Mining and Manufacturing

1. Developed Country Tariff Cuts for High-Tariff Goods

Japan's tariff rates on goods in mining and manufacturing are extremely low-virtually zero in the case of machinery, electrical equipment and transport equipment. The United States and EU, on the other hand, continue to impose tariffs in these areas, with, moreover, high tariffs placed on products such as trucks in the case of the United States and some household electrical appliances in the case of EU. Through the upcoming negotiations, it will be important to eliminate tariff barriers in areas such as these, where Japanese industry is highly competitive.

The textile area is still subject to high tariffs in the United States, EU, which also maintain import quantitative quota systems (including chemical synthetic fibres and wool). These import quota systems are based on the "Protocols extending the Arrangement Regarding International Trading Textiles (MFA)" and must be phased out by 2005. However, countries should not wait for 2005, but rather eliminate their quota systems as soon as possible, also reducing high tariffs.

2. Redressing Developing Countries' High Tariff Rates and Improving Binding Ratios

Developing countries still retain high tariffs on a wide range of products, obstructing exports of transport equipment, construction and electrical machinery, iron and steel, chemical products and other goods where Japanese companies are highly competitive. Substantial reductions are needed on these high tariff rates.

Moreover, many countries have relatively low binding ratios, leaving them free to raise tariffs on many products. There are many instances where such sudden tariff raises obstruct Japanese exports. Improvement on binding ratios must be sought on more items of product in order to increase predictability and ensure the facile development of the foreign business of Japanese companies.

At the same time, in reducing and eliminating developing country tariff barriers, some consideration is needed in regard to the economic circumstances and stage of development of individual countries. For example, measures such as providing an adequate time frame for the implementation of tariff cuts should be taken into account.

3. Negotiation Modalities

Reduction or elimination of the high tariffs noted in 1. and 2. above should be sought using modalities such as formula cuts (all countries lower their tariffs based on a set formula), peak tariff cuts (reduction of tariffs over 10% or high tariffs which overshoot average rates) and zero-zero harmonization agreements (across-the-board tariff elimination or reduction to a set rate in areas of concern to major countries).

Another objective which should be established is reducing developing countries' ratio of non-binding items by at least a half.

In addition, consideration should be given to comprehensive elimination of low tariffs of, for example, five percent or less (so-called "nuisance tariffs") on industrial products.

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