With the advance of rules for international trade through the growing scope and membership of the WTO and bilateral and regional economic partnership agreements, Japanese companies have become increasingly concerned with foreign nations' compliance with trade rules.
In two earlier position papers entitled "Challenges for the Upcoming WTO Negotiations and Agendas for Future Japan's Trade Policy" (May 1999) and "Towards the Implementation of Strategic Trade Policies" (June 2001), Keidanren called for the creation of a system to help companies damaged by unfair trade practices of foreign nations. Under such a system, injured companies would be able to petition the Japanese government to initiate investigations that, if successful, would lead to relief. But such a system has yet to be established.
Both the United States, in its Trade Act of 1974, and the European Union, in its Trade Barriers Regulation, have established statutes addressing unfair trade practices of foreign nations. By contrast, the absence of domestic procedures in Japan is a cause for concern over the stability of Japanese companies' overseas strategies and implies a loss of bargaining power vis-a-vis foreign governments. The creation of such procedures, while increasing the transparency and fairness of Japan's administrative processes, is also essential for increasing opportunities for public participation in these processes. Moreover, in terms of foreign-affiliated companies engaged in business activities in Japan, procedures aimed at insuring a level playing field would likely promote inbound direct investment - a longstanding, top government policy objective.
Furthermore, such action, based predominantly on WTO rules, would have corrective effects on the practices of foreign nations that are injurious to free trade, and in turn contribute to the stability of the world trading system.
Consequently, the Japanese business community strongly urges the Japanese government to enact a petition system for initiation of investigations regarding unfair trade practices of foreign nations as soon as possible.
Since the inception of the WTO in 1995 following the GATT Uruguay Round, rules and regulations under multilateral trade systems have become increasingly sophisticated. Current WTO negotiations, too, are aimed at market liberalization and the further refinement of rules., The WTO's dispute settlement mechanism is more efficient than that under the GATT, thanks to the automation of the process governing the approval of panel establishment and report adoptions, deadlines required for each step in the process, and the establishment of appellate body. As a result, during the nine years between 1995 and 2003, submissions of disputes to WTO reached 304 cases, nearly equaling the 314 cases submitted over the 47-year period under the GATT between 1948 and 1994.
Additionally, in parallel with the WTO negotiations, in recent years many nations, including Japan, have been working on bilateral and regional economic partnership agreements (EPAs) and free trade agreements (FTAs), which often contain their own particular provisions for dispute resolution.
To prevent trade practices and customs in breach of such international agreements from being adopted or maintained, trade laws in the EU and US allow companies and associations injured by unfair practices to call for corrective measures to be taken by their national governments, through a dispute settlement mechanism. South Korea and China are also considering adopting such systems.
Japanese companies and associations are able to register complaints about unfair trade practices of foreign nations to the Ministry of Economy, Trade and Industry during the compilation of the annually published "Report on the WTO Consistency of Trade Policies by Major Trading Partners." But there is no procedure for requesting initiation of an investigation with the aim of correcting the problems.
As a result, at present, the only countermeasure that Japanese companies hurt by foreign trade practices can take is to make an appeal through an industry association or similar body to the government minister in charge. Although this method is not entirely without merit, in the sense that it affords government and the private sector a realistic means of response, it has been noted for its opacity and instability because it would seem to leave issues to the government's discretion.
Moreover, the ministry in charge varies depending upon the affected sector. To illustrate, the Ministry of Economy, Trade and Industry would have to be addressed in matters of general industrial products; the Ministry of Agriculture, Forestry and Fisheries in matters of food or agricultural and marine products; the Ministry of Economy, Trade and Industry and the Ministry of Public Management, Home Affairs, Posts and Telecommunications in matters of telecommunications services; the Ministry of Land, Infrastructure and Transport in matters of transport, distribution, and construction services; the Ministry of Finance in matters of customs valuation; and the Ministry of Health, Labor and Welfare, and the Ministry of Justice in matters of immigration or employment, and so forth. Many Japanese companies also complain about the lack of a unified approach among the various ministries. Moreover, depending on the matter at issue, it may even be difficult to identify the minister in charge.
In order to increase the reliability and stability associated with petitions submitted by companies to the government, the government should create procedures that are coherent, fair, and transparent. Such a system would prove helpful not only for large enterprises but even more so for companies without direct contacts with the government, i.e., small and medium-sized companies and regional companies.
The creation of procedures under which companies could call on the government to initiate an investigation would not only help directly affected companies and associations, but also contribute to enhancing the welfare of the public in counterpart nations, who indirectly suffer from such unfair trade practices, and benefit the entire global economy by promoting free trade and the stability of international trade.
This system would afford domestic companies legal grounds for the submission of petitions while at the same time preserving the current method of initiation of investigations at the decision of the minister in charge. It is desirable to maintain both systems.
The Japanese business community calls upon the Japanese government to enact legislation to establish a petition system for the initiation of investigations regarding unfair trade practices of foreign nations. Concomitant with this legislation, the government should increase the number of expert staff and implement budgetary measures.
Specific provisions that should be included in the new law are described below. The following proposition references the European Commission's Council Regulation (EC) No. 3286/94 (Trade Barrier Regulation) and Articles 301 to 310 of the US Trade Act of 1974, and is based among others on a survey conducted in the period from October to December 2003 sent to 563 member companies of the Japan Business Foundation (121 respondents).
The scope of the measure should include all measures and practices that adversely affect or threaten to adversely affect interests guaranteed under international treaties to which Japan is a party. These treaties shall include WTO treaties and bilateral and regional economic partnership agreements. Subject acts shall comprise any and all types of practices, including those contained in treaties on trade in goods and services, investment, and intellectual property rights.
The required condition for petition is the existence of measures and/or practices that inflict or threaten to inflict adverse trade effects on a company, and that adversely affect or threaten to adversely affect interests guaranteed under an international treaty concluded with a foreign nation.
All domestic operators of businesses who have suffered adverse trade effects or are threatened with adverse trade effects shall be able to act as petitioners. Included among domestic operators shall be all exporters, individual enterprises, industrial associations, producers of goods and services and worker associations.
Petitioners will lodge a complaint with the Cabinet Office.
Given that this issue relates to the unification of authority and organizational structures in respect to trade negotiations with foreign nations, it is recommended that the government consider this matter immediately, while the business community proceeds with formulation of its stance.
With respect to the measures and practices that have caused or threaten to cause negative effects, petitioners shall be able to lodge a complaint to government for initiation of an investigation based on a minimum of proof required for the initiation of an investigation. A clear statement is needed as to the basic documentation to be appended to a petition. Evidence that petitioners are able to gather using reasonable methods shall be deemed sufficient.
Although this procedure is not meant for submission to procedures for dispute settlement, in the event that measures and practices are found to breach of international treaties and have not been addressed by corrective action by foreign government in question, it is hoped that such investigations would be conducted with the intent of calling for talks or initiating dispute settlement procedures.
The government must make a decision as to whether or not to initiate a formal investigation regarding a particular matter within a certain period of time, say 45 days, after receiving a petition from a company or association.
Moreover, at the start of an investigation, a time limit (possibly six months) for submission of the report of its results must be established. An additional six-month time limit after the submission of an investigation report must be set for the government to make a determination on measures to be taken. Establishment of such time limits is extremely important for companies and industries that need swift resolution to trade disputes.
In the event that the government determines not to initiate an investigation, it shall be required that the petitioner be notified promptly in writing of the specific reasons for the dismissal of the petition. This shall be applicable irrespective of whether, for example, proof has been found insufficient for an investigation to be opened, or opening of an investigation has been judged to be in material conflict with the public interest.
Due Process should be guaranteed, such as notification concerning the opening of investigation, submission of opinions by interested parties, and public hearings, etc.
Upon request of the petitioner, the government must disclose the extent of progress, etc., made in respect to the investigation under a pertinent petition. Furthermore, contingent on the approval of the petitioner and redacting confidential information, the government's final judgment shall be made public. The use of provided information shall be explicitly prohibited for purposes other than those stated.
In Japan, in cases when companies call on the government to initiate anti-dumping and countervailing measures, the procedures are stipulated in the Customs Tariff Law. However, even in respect to these measures and safeguard provisions, there are numerous points in need of improvement, for example procedural speed and the explicit provision of companies' rights as petitioners. Furthermore, existing statutes such as the Customs Tariff Law, Foreign Exchange and Foreign Trade Law must be reviewed so as to ensure their consistency with new legislation.