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) 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) 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
- 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.
- 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
- Japan and the EU should promote harmonization and mutual recognition of standards and regulations in the following ways:
- Unification of standards and regulations.
- 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.
- 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).
- 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
- 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.
- A cabinet member and a commissioner should be involved in the mechanism so that it can be fully effective in fulfilling its purposes.
- 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) 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) 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) 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.
|Sector||Course of action |
for regulatory cooperation *
|Priorities for regulatory cooperation|
- * Points summarized from the recommendations issued in March 2015