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Policy Proposals  Trade, Investiment, EPA/FTA Renewed Call for Promoting Japan-EU Regulatory Cooperation A future-oriented approach required for the earliest conclusion of the EPA/FTA

(Provisional translation)
11 November 2015
Keidanren

I. Basic thinking

As corporate value chains expand globally, differences in domestic regulations have an increasing impact on business costs. Without compromising their legitimate purposes such as to protect the environment, safeguard people's health and safety and protect personal information, in order to minimize their negative effects on trade and investment while making them truly effective, there is a need to promote international regulatory cooperation through means such as ensuring regulatory coherence and transparency and harmonizing and mutually recognizing technical regulations and standards.

On the basis of this thinking, in March this year KEIDANREN came up with "Recommendations for Japan-EU Regulatory Cooperation - Looking Beyond Concluding the EPA/FTA"#1 with a view to promoting regulatory cooperation by partnering the EU, which shares basic values with Japan and has strong influence in designing, developing and spreading regulations.

II. Developments subsequent to the previous recommendations

  1. (1) After more than half a year since KEIDANREN's recommendations were made public, the basic recognition stated above has become widely shared among governments and business communities in Japan and the EU.

    In its joint release with KEIDANREN after the fourth Sector-to-Sector Meeting between the EU and Japan in April, BUISNESSEUROPE expressed its basic position as follows: "Looking beyond the EPA/ FTA, regulatory cooperation between the EU and Japan should definitely be reinforced within the framework of the agreement to prevent unnecessary regulatory divergence."#2

    In its joint recommendations in April#3, the EU-Japan Business Round Table said, "The EU-Japan FTA/EPA can, together with the TPP and TTIP, play a leading role in promoting global trade rule-making, regulatory cooperation and standards' harmonisation....." The BRT also "calls on the Leaders of the EU-Japan Summit to ensure that the FTA/EPA provides a solid and comprehensive framework for regulatory cooperation to address the sector-specific concerns of the business community."

    Commemorating the 15th anniversary of its establishment, the Japan Business Council in Europe (JBCE) held a seminar in which representatives from governments and business communities of Japan and the EU discussed the future of EU-Japan regulatory cooperation.#4

    At the government level as well, there are some positive developments. On the same date (17 March) when the KEIDANREN's recommendations were made public, the Ministry of Economy, Trade and Industry (METI) and the European Commission Directorate General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) adopted a joint document#5 regarding regulatory cooperation between Japan and the EU as part of what the Japan-EU Industrial Policy Dialogue has achieved.

    In the joint press statement of the 23rd Japan-EU Summit held in May#6, political leaders of Japan and the EU expressed their "great expectation for further progress in regulatory cooperation between Japan and the EU, while noting that the cooperation is also to be dealt with via the EPA/FTA negotiations."

    At the meeting with KEIDANREN in May, Ms. Cecilia Malmström, European Commissioner for Trade, who participated in the 23rd Japan-EU Summit, emphasized the importance of regulatory cooperation by saying, "Finally, and perhaps most importantly, we need an agreement that makes European and Japanese regulation more compatible" and pointing out that "Regulatory cooperation is the future of trade policy, which is where the EU and Japan both need to be." According to Ms. Malmström, regulatory cooperation means "trying to remove unnecessary technical differences between our systems, on the basis of international standards, in order to boost growth, and to save time, money and energy." She said that she "was delighted to read in KEIDANREN's paper of this March that you strongly support this objective. And I share your view that we should shift to a higher gear. These negotiations are an excellent opportunity to do that." The Trade Commissioner also mentioned that "we should tackle existing barriers and also set up a mechanism that will enable us to address future ones." She concluded, "There are still differences that raise the cost of trade between our economies. A good deal will reduce them, and will also help us develop new international standards that can eventually be applied in other markets. That means we can make a contribution to an open global market for our products through this bilateral deal."#7

    These recognitions have been reflected in the trade and investment strategy the European Commission proposed in October, giving a high priority to regulatory cooperation in negotiating FTAs with strategic trading partners like the United States and Japan.#8

  2. (2) As we proposed in our recommendations in March, regulatory cooperation on a continuous basis requires the Japan-EU EPA/FTA to serve as a robust institutional foundation. Now that the negotiations on the EPA/FTA have come to the most important stage on the basis of the agreement between political leaders of Japan and the EU at the Summit in May#9, we at Keidanren hereby propose some recommendations on regulatory cooperation.

    Considering that the emerging economies will increasingly gain weight in the world economy, building on what will be achieved through regulatory cooperation with the EU, it is important that Japan will have to reinforce cooperation with the U.S. and other advanced countries, and extend the circle of cooperation to the Asian and other third markets. The difficult negotiations will be only brought to a conclusion if a future-oriented approach is taken so that Japan and the EU can find medium- and long-term benefits in the EPA/FTA and cooperate to realize them.

    It is to be noted that the Trans-Pacific Partnership Agreement concluded on 5 October provides for the promotion of regulatory coherence.

III. Horizontal Regulatory Cooperation

The Japan-EU EPA/FTA should include the following provisions for horizontal regulatory cooperation.

1. Regulatory Coherence and Transparency

  1. In designing and developing regulations, Japan and the EU should each take into account the other party's regulatory approach, relevant international standards, and their impacts on international trade and investment.
  2. When introducing or revising domestic regulations, Japan and the EU should notify and consult with the other party, supply available scientific and technical data, and solicit comments at an early stage.

2. Harmonization and Mutual Recognition of Standards and Regulations

  1. Japan and the EU should promote harmonization and mutual recognition of standards and regulations in the following ways:
    1. Unification of standards and regulations.
    2. Harmonization of standards and regulations. If relevant international standards exist, they should be applied by both sides or used as the basis for harmonization of different requirements.
    3. Even if no unified or harmonized standard or regulation exists, mutual recognition should be promoted based on the assumption that a certain product which is lawfully produced and traded by one party can be imported and distributed by the other. Mutual recognition should be based, where appropriate, on the acceptance of functional equivalence (the relevant standards and regulations applied by each party achieve equivalent outcomes as regards the fulfilment of the legitimate public policy objectives).
  2. Even where harmonization or mutual recognition of standards and regulation is not possible, Japan and the EU should at least exchange information and secure transparency through means such as notification at a sufficiently early stage before the introduction and publication of standards and regulations.

3. Mechanism for Regulatory Cooperation

  1. The Japan-EU EPA/FTA should provide for a mechanism to reinforce regulatory cooperation, comprising representatives of the relevant ministries and agencies such as regulatory and industrial authorities. The functions of the mechanism should include monitoring the implementation of agreements for regulatory cooperation and making proposals for the revision of the agreements among other things.
  2. A cabinet member and a commissioner should be involved in the mechanism so that it can be fully effective in fulfilling its purposes.
  3. The voices of businesses that keep up with technological trends should be reflected to the fullest extent possible to ensure that standards and regulations can reflect technological progress in order for the mechanism to fulfill its purposes.

IV. Sectoral and Specific Cooperation

  1. (1) On the basis of the progress to date of the sectoral dialogue between Japan and the EU that Keidanren has promoted, priorities for regulatory cooperation in the major sectors are listed in the attachment. Of these priorities, those that can be agreed upon in the negotiations should be incorporated into the EPA/FTA.

  2. (2) Among the recommendations on specific issues (personal data protection, unification of European patent system, measures to combat counterfeit goods and EU regulations on conflict minerals), with regard to personal data protection, in Japan, amendments to the Act on the Protection of Personal Information were passed through the last Diet session. These amendments significantly strengthen discipline on the protection of personal information by establishing a data protection agency which will function as the center of administration for protecting personal information and introducing new provisions to deal with issues beyond national borders. Moreover, the recently concluded Trans-Pacific Partnership (TPP) Agreement contains a provision that allows the cross-border transfer of information including personal information when this activity is for the conduct of the business of a covered person. Considering these recent developments, the Japan-EU EPA/FTA should provide for the free cross-border transfer of personal information where the other party protects personal information at an adequate level. Proposed regulations on data protection have been under discussion in the EU for adoption by the end of this year as part of the Digital Single Market initiative. Under the new regulations as well, cross-border data flow should be allowed between the EU and Japan within the framework of the EPA/FTA.

    Japan and the EU should join forces to promote rule-making at the international level, including third countries, on the basis of the measures incorporated in the OECD "Guidelines governing the protection of privacy and trans-border flows of personal data" (adopted in 1980 and updated in 2013).

  3. (3) Today, the development of digital technologies is leading to many initiatives in advanced countries to create added value by obtaining and utilizing data regarding production process and consumers. With business activities going increasingly borderless, a key to the success of those initiatives is to ensure that regulations and institutions, along with standardization and information security, should be coherent at the global level. Japan and the EU will have to cooperate in this area.


Attachment

SectorCourse of action
for regulatory cooperation *
Priorities for regulatory cooperation
Auto- mobiles
  • In cooperation with EU governments and car manufacturers, JAMA will encourage Asian countries to accede to the 1958 Agreement.
  • With the introduction of advanced technologies to emerging economies, Japan and the EU will join forces to promote the introduction of the IWVTA which is designed to change the basis of reciprocal recognition of approvals from equipment and parts to whole vehicle.
  1. Encourage Asian countries to accede to the 1958 Agreement
  2. Introduce the IWVTA (International Whole Vehicle Type Approval) system in the future
  3. Improve the implementation of the 1998 Agreement (revision of the agreement to facilitate the adoption of GTRs at the national level)
  4. Support the international harmonization of standards regarding automated driving technology
Chemicals
  • JCIA and Cefic are studying specific steps they should take, bearing in mind negotiations on measures related to regulatory cooperation between the EU and the US in the framework of the TTIP.
  • Regulatory cooperation has also been addressed in the chemical dialogue at the APEC and ICCA. Being mindful of discussions on chemicals management in international organizations such as the OECD, JCIA will cooperate closely with Cefic to ensure industry views are reflected in a timely and appropriate manner.
  • Japan needs to make the Chemical Substances Control Law commensurate with international trends in chemicals management.
  1. Cooperate on prioritization of substances for assessment and collaborate on actual assessment
  2. Promote alignment in classification and labelling of chemical products (commitment to apply the UN GHS [Global Harmonized System] across chemicals and to implement periodic amendments subsequently)
  3. Develop a common approach to risk assessment of chemical mixtures (issuance of guidance, etc.)
ICT
  • JEITA and DIGITALEUROPE are poised to cooperate with each other to reinforce regulatory cooperation based on the recognition that coherent systems among advanced countries including the US will help prevent protectionist measures from prevailing in third countries.
  • In cooperation with DIGITALEUROPE and ITI in the US, JEITA has accelerated its efforts to stem the further proliferation of forced localization measures, aimed at strengthening local capabilities related to technology, research & development and production (they are sounding the alarm about the possible detrimental effects of data localization requirements on the growth of the world economy).
  1. Ensure the free flow of data and prevent the spread of forced localization measures in the EPA/FTA, by incorporating the following provisions as is the case with the TPP:
    • "Each Party shall allow the cross-border transfer information by electronic means, including personal information, when this activity is for the conduct of the business of a covered person."
    • "No Party shall require a covered person to use or locate computing facilities in that Party's territory as a condition for conducting business in that territory."
    • "No Party shall require the transfer of, or access to, source code of software owned by a person of another Party, as a condition for the import, distribution, sale or use of such software, or of products containing such software, in its territory."
  2. Promote the cooperation for preventing the spread of forced localization measures such as those stated above, aimed at strengthening local capabilities related to technology, research & development, and production
Medical devices
  • Through DITTA which has been organized mainly by the industries of Japan, the US and Europe, Japanese industry will cooperate with Europe and the US to secure regulatory coherence with emerging economies which are participating IMDRF.
  1. Improve the efficiency and effectiveness of audits of medical device manufacturers' quality management systems (establish a MDSAP: Medical Device Single Audit Program)
    * Since all the important guidance documents are finalized, a full-fledged pilot program will be started.
  2. Improve the efficiency and effectiveness of pre-market review
Pharma- ceuticals
  • ICH is scheduled to become a global framework, consisting of regulators and industry representatives from Japan, the US, Europe and various other countries. Within this framework Japan and the EU will cooperate with the US to call upon emerging economies to harmonize their regulations with advanced countries.
  • Japan, the EU and the US will also take various other opportunities to join forces to urge emerging economies to harmonize regulations which are not dealt with in ICH.
  1. Expand the scope of the Mutual Recognition Agreement (MRA) on GMP (Good Manufacturing Practices) to all pharmaceutical products pursuant to Japan's participation in the Pharmaceutical Inspection Co-operation Scheme and its coverage to new EU member states
  2. Explore the possibility of recognizing functional equivalence of each other's GMP inspections conducted in Japan and the EU and in third countries
  3. Establish a robust framework for intellectual property protection and enforcement
  4. Introduce an "early resolution mechanism" into the generics approval system
Textiles
  • JTF will continue to engage in dialogue with EURATEX to explore the possibility of agreeing on: i) Minimizing requirements for compulsory labelling affixed to products while maintaining the current level of consumer protection; ii) Harmonizing technical regulations and approaches to guaranteeing product safety and consumer protection in order to avoid unnecessary costs incurred due to divergence in regulations and approaches; iii) Studying ways of protecting textile and apparel designs from copying activities through intellectual property rights systems that are mutually beneficial and suited to the short life cycle of such designs, and working together to lobby both governments on this issue.
  1. Minimize labelling requirements.
    • Minimize the number of compulsory labelling requirements
    • Approximate or align the names used to designate textile fibers on the basis of ISO standards
    • Harmonize care instruction symbols on the basis of the ISO standard
  2. Harmonize technical regulations and approaches to guarantee product safety and consumer protection
    • Standardize methods for measuring the quality of certain specialized textiles
  3. Study ways of protecting textile and apparel designs from copying in a manner tailored to the short life cycle of such designs
Other
(Railways)
  • In contrast to other sectors, dialogue in railway sector have not focused on non-tariff measures and regulatory cooperation, but on procurement by Japanese railway operators. Some Japanese railway operators have redesigned their websites to include codes of conduct regarding material procurement, lists of main procurements expected in the fiscal year, and standard flows of contractual procedures and elements to be considered in screening. One operator has been proactively procuring from overseas, for example by opening up a new international tender process for the procurement of railcars and holding seminars to promote mutual understandings with EU suppliers by exchanging information on procurements, procurement procedures and products they can offer.
  • The governments of Japan and the EU hold the Japan-EU Railway Industrial Dialogue.
  1. At the 23rd Japan-EU Summit, both political leaders stated that they "recognise the value of enhanced cooperation, including on technical standards, both between the public authorities and business representatives of two of the world leading players in this sector. We are confident that the dialogue can lead to enhanced openness of our respective markets and to joint actions in the global market."
  2. At the Dialogue held in May and November in 2015, technical regulations were on the agenda. Both sides will continue to exchange information through the Dialogue.
  • * Points summarized from the recommendations issued in March 2015

  1. http://www.keidanren.or.jp/en/policy/2015/024_recommendations.html#s1
  2. http://www.keidanren.or.jp/en/policy/2015/041.html
    https://www.businesseurope.eu/sites/buseur/files/media/imported/2015-00318-E.pdf
  3. http://www.eu-japan-brt.eu/ja/joint-recommendations-authorities
  4. http://www.jbce.org/wp-content/uploads/2015/06/JBCE15-SummaryReport-final.pdf
  5. http://www.meti.go.jp/english/press/2015/0317_02.html
  6. http://www.mofa.go.jp/mofaj/files/000082848.pdf
  7. http://www.euinjapan.jp/wp-content/uploads/20150529eun147keidanrenSPEECHbru.pdf
  8. http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf
  9. http://www.mofa.go.jp/files/000082848.pdf

Trade, Investiment, EPA/FTA