June 2016 Trade Policy Bureau Ministry of Economy, Trade and Industry “2016 Report on Compliance by Major Trading Partners with Trade Agreements - WTO, EPA/FTA, and IIA-” and “METI Priorities Based on the 2016 Report”
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June 2016
Trade Policy Bureau Ministry of Economy, Trade and Industry
“2016 Report on Compliance by Major Trading Partners with Trade Agreements - WTO, EPA/FTA, and IIA-”
and “METI Priorities Based on the 2016 Report”
○ Select priority issues from among measures analyzed in the report. ○ Publish government actions taken for priority issues and their achievements.
○ Experts (“Subcommittee on Unfair Trade Policies and Measures” under the Industrial Structure Council, chaired by Mr. Shujiro URATA, Professor of International Economics, Graduate Schools of Asia-Pacific studies,
Waseda University) analyzed problems with trade policies and measures of major trading partners based on international rules, including WTO agreements. ○ The report has been published every year since 1992. The 2016 report is the 25th edition. ○ The United States and the EU also publish the similar annual reports.
Report on Compliance by Major Trading Partners with Trade Agreements
International Economic Dispute Settlement Using the Report on Compliance by Major Trading Partners with Trade Agreements
Industries
Present strategies Report results
Foreign governments
Point out inconsistencies
with the international
rules
Avoid unnecessary trade friction
Promote collaboration between govt. and private sector • Investigate consistency with
international rules • Develop strategies • Request the abolishment of
measures through bilateral consultations
• Raise the issues in multilateral forums
• Utilize dispute settlement mechanisms including WTO
Action taken from METI Priorities
METI Priorities
Provide information Request assistance
1
Collaborate with other countries
sharing common awareness
Outline of the 2016 Report on Compliance by Major Trading Partners with Trade Agreements
○ Points out the actual or potential inconsistencies with international rules of 139 policies/measures of 18 countries and territories
○ 7 policies/measures newly listed are all those in emerging countries. Safeguard measures, etc. are increasing due to the excess-supply problem.
○ The following columns are newly featured. Analysis of how implementation under WTO dispute settlement mechanism is ensured and
reasons therefor Examine background and factors for high implementation rates of WTO DSB recommendations Consideration of competitive relationship between products in AD investigations - Strengthening of rules for analyzing injury through WTO dispute settlement procedures - Discuss recent WTO precedent including the Appellate Body’s decision that completely upheld Japan’s claims, and explain Japan’s efforts for clarifying disciplines on AD investigations Rules on subsidies and industry support measures by emerging countries Examine and analyze provisions and judicial precedents concerning related subsidy agreements based on the understanding that industry support measures taken by emerging countries for their major industries are one of the causes of excess equipment
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China AD measures on acrylic fiber Cybersecurity Bills
Indonesia Local content requirements for 4G/LTE mobile devices, etc. Vietnam Safeguard measures (semi-finished steel products, steel bars, etc.)
India Safeguard measures (hot-rolled steel) South Korea AD measures on pneumatic valves
Tunisia Import regulations on tires
METI Priorities (Progress of Main Issues)
2015 Priorities
WTO recommendations have been implemented for these issues.
2016 Priorities
(1) Issues to be resolved through bilateral/multilateral consultations with possible use of the WTO Dispute Settlement Mechanism
China: Correction of Banking IT Equipment Security Regulations
Indonesia: Correction of measures for export restrictions on mineral resources
Brazil: Correction of discriminatory system/ implementation of Industrial Product Tax
(2) Issues Already Referred to the WTO Dispute Settlement Mechanism
China: Elimination of AD duty measures on high-performance stainless steel seamless tubes manufactured in Japan
Ukraine: Revocation of safeguard measures against automobiles
(3) Issues on which Japan urges prompt implementation of the WTO recommendations
China: Elimination of export regulations on raw materials (i.e. rare earths, etc.)
United States: Confirming abolition of zeroing
Argentine: Elimination of import restrictions on a wide range of items
etc.
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(1) Issues to be resolved through bilateral/multilateral consultations with possible use of the WTO Dispute Settlement Mechanism
China:
United States: Co abolition of zeroing
Argentine: Elimination of import restrictions on a wide range of items
China: Correction of Banking IT Equipment Security Regulations
Indonesia: • Correction of measures for export restrictions on mineral resources
India: Correction of the safeguard measures (on hot-rolled steel) [new]
South Korea: Correction of the AD duty measures on pneumatic valves [new]
Elimination of AD duty measures on high-performance stainless steel seamless tubes manufactured in Japan
Brazil: Correction of discriminatory system/ implementation of Industrial Product Tax
etc.
(2) Issues Already Referred to the WTO Dispute Settlement Mechanism
(3) Issues on which Japan urges prompt implementation of the WTO recommendations
China: AD Measures on Japanese High-Performance Stainless Steel Seamless Tubes
In September 8 2011 MOFCOM gave a public notice of the initiation of AD investigation. In November 8 2012 MOFCOM gave a public notice of the final determination. In December 20 2012 The Japanese government requested consultations with the Chinese government under the WTO Agreements. In January 31 2013 Japan and China conducted bilateral consultations in Tokyo (EU requested to join the consultations) In April 11 2013 The Japanese government requested the establishment of a panel under the WTO Agreements. In August 16 2013 EU requested the establishment of a panel. The panel was established in the same month. The two panels were integrated. In February 13, 2015 The panel report was circulated to the Members. The panel found that China's AD measures were inconsistent with the AD
Agreements with respect to its determination of injury and causation as well as certain procedural issues. In May 20, 2015 Japan notified the DSB of its decision to appeal certain issues addressed by the panel, including the interpretation of Articles 3.2
and 3.4. China also appealed certain issues. In October 14, 2015 The Appellate Body circulated to the Members its report which fully accepted Japan’s claims.
In October 2015, the Appellate Body circulated its report which fully upheld Japan’s claims, ruling that China’s AD measures violated the WTO Agreement. Japan requests China to withdraw/modify these measures promptly.
Current Status
On November 8, 2012, Chinese Ministry of Commerce (MOFCOM) gave a public notice of the final determination to impose the anti-dumping (AD) measures (AD duties to be imposed in the coming 5 years) regarding the AD investigation on Japanese and EU high-performance stainless steel seamless tubes.
The AD measures are highly likely to be inconsistent with the WTO AD Agreements because of (i) flaws in the determination of injury and causation (almost all Japanese products are high-grade steel used in ultra supercritical boilers in coal-fired power plants, but injury and causation were determined in spite of the fact that Japanese and Chinese products do not compete and Japanese imports do not seem to cause any injury to the Chinese domestic industry), and (ii) flaws in investigation procedures such as insufficient disclosure of essential facts.
Summary of Measures
Background
Injury and causation • The Appellate Body upheld the findings by the panel that China’s AD measures were inconsistent with Article 3.5 of the AD Agreement because China failed to take
into account differences in performance, grade and usage between high-performance products from Japan and Chinese products in establishing injury and causal link . • The Appellate Body also found that China failed to take into account the aforementioned differences in examining the effect of dumped imports on domestic prices
(Article 3.2) and their impact on the state of the domestic industry (Article 3.4), and violated Articles 3.2 and 3.4 of the AD Agreement. Procedurural issues • The Appellate Body upheld the finding by the panel that China’s AD measures were inconsistent with the AD Agreements due to defects concerning the treatment of
confidential information (China’s appeal was dismissed).
Rulings by the Appellate Body
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Out of the issues listed in 2015 Priorities, the following achievements were attained.
July 2011, the Ukrainian government initiated the SG investigation on automobiles. April 2012, the Inter-Departmental Commission for International Trade of Ukraine decided to impose the SG measures. Details of the final decision and the timing of the imposition of the measures were not made public. Taxation of 6.46% on 1000-1500cc engine cars and 15.1% on 1500-2200cc engine cars.
In March 2013, the Ukrainian government announced the imposition of SG measures, which would take effect after 30 days from the announcement date (March 14, 2013) (effective for 3 years). Additional tariff rates are 6.46% on cars of 1000-1500cc displacement and 12.95% on cars of 1500-2000cc displacement, and it is estimated that tariffs of approximately 1.94 billion yen per year will be additionally imposed on exports from Japan. The SG measures took effect on April 14, 2013.
Ukraine: Imposition of Safeguard Measures against Automobiles
In June 2015, the panel report accepting Japan’s arguments was publicized, and the Ukrainian government abolished the safeguard measures in September of the same year.
Current Status
Summary of measures
Requirements for commencing SG measures Ukraine failed to make proper determination on “unforeseen developments” and “the effect of the obligations (under GATT)” and this is
not consistent with Article XIX (a) of the GATT. Ukrainian measures are not consistent with the SG Agreement as (1) proper determination has not been made on an increase in
imports, (2) proper determination has not been made on risks of serious injury to domestic industries, and (3) causation between the increase in imports and serious injury to domestic industries has not been proved nor have any non-attribution factors been appropriately analyzed.
Procedures These measures are not consistent with the SG Agreement as there are also procedural flaws such as failures to disclose material facts, make notifications and provide opportunities for prior consultations.
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Rulings by the Panel
July 2013 Japan raised the issue at the WTO Council on Trade in Goods. August 2013 Japanese Minister for Foreign Affairs, requested Ukrainian
Minister for Foreign Affairs, for the elimination of the measures.
October 2013 Japan requested consultations with Ukraine under the WTO dispute settlement procedures.
February 2014 Japan requested the establishment of a WTO panel. March 2014 Japan requested the establishment of a WTO panel. June 2015 The final panel report accepting Japan’s arguments was
publicized. September 2015 Ukraine abolished the SG measures.
October 2011, April 2012 Japan expressed concerns at the WTO SG Committee (jointly with EU in October, and with EU and Korea in April).
June 2012 Director General of Manufacturing Industries Bureau in METI sent a letter requesting suspension of implementation to Ukrainian Minister of Economic Development and Trade.
March 2013 Japan expressed concerns at the WTO Council on Trade in Goods. April 2013 Japan requested the consultations with Ukraine under the SG
Agreements. Japan expressed concerns at the WTO SG Committee. June 2013 Japanese Vice Minister of Economy, Trade and Industry, requested
the Ukrainian Minister of Environment and Energy for the elimination of the measures.
Background
Out of the issues listed in 2015 Priorities, the following achievements were attained.
After the global financial crisis in 2008, Argentina introduced non-automatic licenses (targeting 400 items on the basis of HS codes). The number of items subject to the system was increased to 600 in February 2011. In many cases, it took 100 days or more to issue an import license,
and as a result, export from Japanese companies to Argentina has been delayed (Export of automobiles, their parts, motorcycles, cell phones, PCs, tires etc. has been affected).
Moreover, trade balancing requirements (requiring one-dollar export as a condition for one-dollar import) and prior import declaration requirements were introduced for importers, with the effect of restricting imports.
Although there has been some limited progress including the abolition of non-automatic import licenses on January 26, 2013 (just before the establishment of the panel), other measures (trade balancing requirements and prior import declaration requirements) are still in place.
Argentina: Import Restriction on a Wide Range of Items
At the end of December 2015, Argentina announced the abolition of the prior import declaration requirements (DJAI), but at the same time introduced a new licensing system. Japan will collect information on this new system and will request proper correction of measures, together with the United States and the EU.
Current Status
In December 2012, Japan, jointly with the United States and the EU requested establishment of a panel. In August 2014, the panel issued the final report completely affirming the arguments by Japan, the United States, and the EU. In September 2014, Argentina appealed. In October of the same year, Japan and the EU cross-appealed. In January 2015, the Appellate Body published a report to support the panel's final report, ruling that the Argentina's import restriction measures (trade balancing
requirements and prior import declaration requirements) are inconsistent with Article XI:1 of the GATT (general elimination of quantitative restrictions). On December 31, 2015, Argentina simultaneously announced the abolition of the prior import declaration requirements and the introduction of a new import
licensing system (SIMI). The SIMI includes non-automatic licensing (for 1,000 items) and it is not clear what items are an improvement over the DJIA. Therefore, Japan will continue collecting information and monitoring so that Argentina will surely correct these measures.
Background
Summary of measures
Trade Balancing Requirements These are non-written measures implemented based on verbal guidance. However, various evidence, such as documents released by the government
and affidavits submitted by companies, show that there exist systematic and ongoing measures in which trade balancing requirements are imposed based on Argentine's policies aimed at constraining imports and reducing trade deficits. The requirements are inconsistent with Article XI:1 of the GATT because they constitute import restrictions in that compliance with the trade balancing requirements is a precondition for import and that no written document is available, which leads to a lack of transparency and predictability.
Prior Import Declaration Requirements The requirements are inconsistent with Article XI:1 of the GATT because they constitute import restrictions in that the acquisition of prior import
approval is a precondition for import and that the range and criteria of discretionary exercise of authority by the regulatory authorities, which participate in such requirement system and which can stop or delay the approval process, are unclear.
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Summary of the Appellate Body Report and the Panel Report
Out of the issues listed in 2015 Priorities, the following achievements were attained.
China has introduced quantitative restrictions on the export of rare earths, tungsten and molybdenum, which are significant strategic resources, sequentially since 1999, and has imposed export duties since 2006 (at 25% at the largest).
In July 2010, the Chinese Ministry of Commerce significantly reduced the export quota for rare earths for the latter half of 2010. Since September of the same year, export of rare earths from China to Japan has been stagnant.
China: Export Restrictions on Rare Earths
In August 2014, the Appellate Body issued the final report completely accepting the arguments by Japan, the United States, and the EU. China abolished export quotas and sequentially abolished export duties in May 2015.
Current Status
Summary of measures
Export duties Export duties imposed by China violate the prohibition of the imposition of duties on goods by reason of exportation prescribed in Article 11, paragraph (3) of China’s WTO accession protocol. China cannot invoke Article XX of the GATT (grounds for justification) in relation to Article 11, paragraph (3) of China’s WTO accession protocol. Even if invocation is permitted, export duties imposed by China do not fall under the category of measures necessary for preserving the environment as prescribed in (b) of Article XX of the GATT and cannot be justified.
Export quotas Export quotas imposed by China violate the prohibition of the imposition of quantitative restrictions prescribed in paragraph (1) of Article XI of the GATT. Said export quotas do not fall under the category of measures pertaining to the preservation of limited natural resources as prescribed in (g) of Article XX of the GATT and cannot be justified.
Restrictions on trade rights Restrictions on trade rights, such as requirements for minimum stated capital and export performance, imposed by China violate the prohibition of restrictions on trade rights prescribed in Article 5, paragraph (1) of China’s WTO accession protocol and Articles 83 and 84 of the report of the working group. Said restrictions on trade rights do not fall under the category of measures pertaining to the preservation of limited natural resources as prescribed in (g) of Article XX of the GATT and cannot be justified.
Summary of the Panel Report and Appellate Body Report
Since 2010, bilateral diplomatic consultations have been held repeatedly at a ministerial level. In March 2012, Japan requested, together with the United States and the EU, consultations under the WTO Agreements with regard to three items (rare
earths, tungsten and molybdenum). In June 2012, the US and the European Union requested the establishment of the panel. The panel was established in July 2012. On March 26, 2014, the panel issued a report that completely recognizes the arguments by Japan, the United States and the EU, ruling that China’s
export regulations are inconsistent with the GATT and China’s WTO accession protocol. China and the US notified the DSB to appeal certain issues to the Appellate Body.
In August 2014, the Appellate Body issued a report that completely affirms the arguments by Japan, the United States, and the EU, ruling that China's export regulations are inconsistent with the GATT and China's WTO accession protocol.
In December 2014, Japan, the United States, and the EU agreed with China to set the deadline for correcting the measures to May 2, 2015. In January 2015, China abolished quantitative restrictions on the export of rare earths, tungsten, and molybdenum. In May 2015, China abolished export duties on the export of rare earths, tungsten, and molybdenum.
Background
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Out of the issues listed in 2015 Priorities, the following achievements were attained.
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(1) Issues to be resolved through bilateral/multilateral consultations with possible use of the WTO Dispute
Settlement Mechanism
On September 7, 2015, the Indian Directorate General of Safeguards (DGSG) initiated SG investigation on hot-roll steel and started to impose SG duties as provisional measures on September 14, 2015. On March 29, 2016, the Indian Government published in the Gazette of India on imposition of a safeguard duty for a period of two years and six months from the date of levy of provisional safeguard duty.
India imposes 20% additional duties on all imported goods. Under the Comprehensive Economic Partnership Agreement between Japan and the Republic of India (IJCEPA), duties on Japanese goods had been almost 0%, but additional duties of some 20% became applicable at the beginning of the measures in September 14, 2015.
This safeguard measures are likely to be inconsistent with the GATT and SG Agreements. •An increase in imports as a result of the effect of the obligations assumed under the GATT is not properly identified (Article
XIX, 1 (a) of the GATT) •An increase in import as a result of unforeseen developments is not properly identified (Article XIX, 1 (a) of the GATT) •There are defects in the performance of notification obligations, constituting a procedural inconsistency with the SG
Agreements.
India: Correction of the Safeguard Measures (on Hot-rolled Steel)
Summary of measures
Japan has carefully watched the moves of the Indian competent authority concerning this issue since it initiated the investigation in September 2015, and has submitted government opinion letter, had bilateral consultations, and participated in a public hearing. In the government opinion letter submitted during the investigation, Japan suggested the possible violation of the WTO Agreements of the relevant safeguard measures and requested appropriate determination in the investigation. Japan will continuously make requests to the Indian competent authority to ensure the consistency of their measures with the WTO Agreements.
Priorities
In October 2015, the Japanese government submitted its opinion letter and expressed concerns in a consultation with the DGSG.
In November 2015, Japan presented government opinions at a public hearing. In February 2016, the Japanese Ministry of Economy, Trade and Industry had a consultation with the DGSG and expressed
concerns.
Measures taken
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On March 3, 2015, five organizations of the information and communication equipment industry in Japan jointly submitted written opinions to the Chinese government to express their concerns about this system.
On March 13, 2015, the Japanese government also made statements to the Chinese government with respect to Japan's concerns about this issue. Since March 2015, Japan, the United States, the EU and Canada jointly have expressed concerns about this issue at TBT Committee meetings. In April 2015, the Chinese government decided to postpone the enforcement of the Guidelines for this system and is now reviewing them.
On September 3, 2014, the Chinese government (China Banking Regulatory Commission, the National Development and Reform Commission, the Ministry of Science and Technology, and the Ministry of Industry and Information Technology) issued the "Guiding Opinions on the Application of Secure and Controllable Information Technology to Strengthen Banking Industry Network Security and Informatization" (hereinafter referred to as the "Guidance Opinions"), which stipulate (i) the utilization rate of secure and controllable information technologies in the Chinese banking industry shall reach 75% by 2019, and (ii) the network security audit standards for the Chinese banking industry shall be established and the information technologies dedicated to the banking business and the security inspection of products shall be strengthened.
On December 26, 2014, the Chinese government issued the Guidelines as a follow-up to the Guidance Opinions. With respect to products and services related to information and communication technologies used by banks, etc., the Guidelines require the use of products based on intellectual property rights within China, evaluation and certification based on standards unique to China, the introduction of specifications which hinder cross-border data flows, etc.
On February 12, the Chinese authority publicized the supplementary explanation to the guideline that include the wording that denies the “discrimination based on the country” in the relevant requirements.
The Guidance Opinions and the Guidelines most likely amount to technical regulations concerning IT products for the banking industry. However, they have been neither notified under the TBT Agreement nor applied to the public comment procedure. Also, the Guidelines have not been widely publicized to the related parties.
If the use of products based on intellectual property rights within China, the acquisition of certification based on standards unique to China, etc. are made obligatory, it may be inconsistent with Article 2.1 of the TBT Agreement which requires that products made abroad should be provided for treatment not less favorable than that for domestic products (principle of non-discriminatory treatment). Furthermore, these obligations may be inconsistent with Article 2.2 of the TBT Agreement if they are more trade-restrictive than necessary to achieve legitimate objectives (the security level required for banking business in China).
Summary of measures
China postponed the enforcement of the security regulations and is now conducting reviews. Japan will continue closely monitoring the developments of the reviews and will urge China to correct the system, in cooperation with related countries and related industries, through bilateral consultations and at TBT Committee meetings and other WTO Committee meetings.
Priorities
China: Correction of Banking IT Equipment Security Regulations
Background
10
In December 2008, the Indonesian Diet passed an amendment to the old Mining Law to establish a New Mining Law. The New Mining Law was promulgated after the President’s signature in January 2009.
1) Requirements for adding high value, as well as domestic concentration and refinement With respect to certain minerals, including nickel and copper, the requirements for domestic concentration and refinement
were introduced. In January 2014, a ban on unprocessed ore export was imposed. 2) Export duties and export licensing system A ban on export of copper concentrate and slime (byproduct) was extended up until January 2017 and during that period
Indonesia adopts an export licensing system (which requires to fulfill a commitment to build a refinery, etc.) and imposes export duties on copper concentrate (to be gradually increased up to 60%).
3) Domestic Sales Requirement Producers are required to allocate a certain minimum percentage of their total production and sales to the domestic market. A ban on ore export based on the new Mining Law may constitute a violation of Article XI:1 of the GATT (general elimination of
quantitative restrictions).
Summary of measures
Japan continues to request improvement through opportunities such as bilateral consultations and the framework of the WTO. There is concern that this trend of resource nationalism may spill over to other countries in the medium- and long-term.
Priorities
Indonesia: Export Restrictions on Mineral Resources
Since 2011, Japan, jointly with the United States and the EU, has continuously requested the Indonesian government to correct the high value-added obligations and a ban on ore export at WTO committees, such as the Council on Trade in Goods and the Committee on Trade-Related Investment Measures (TRIMs), etc.
Through bilateral consultations, including after the new government started in Indonesia (October 2014), Japan has continuously requested reconsideration of the measures at summit level, ministerial level in addition to working level.
Measures taken
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(2) Issues already referred to the WTO dispute settlement mechanism
February 2014 The Korean Trade Commission announced the initiation of AD investigations on Japanese pneumatic valves. January 2015 The Commission finally decided the imposition of AD duties on Japanese pneumatic valves August 2015 Korea started to impose AD duties (in addition to a basic duty (8%), a duty of 11.66% is imposed on one
Japanese company and a duty of 22.77% is imposed on other Japanese companies (for five years)).
Background
At the WTO AD Committee meetings in April and October 2014, the Japanese government requested proper investigations. In October 2014, Japan presented government opinions at a public hearing held by the Korean investigating authority. In January 2015, Japan requested the abolition of the measures at the Japan-Korea High-Level Economic Consultation (with
participation of the Vice Minister of Foreign Affairs or equivalent officers) and announced the possibility of requesting bilateral consultations.
In March 2016, Japan requested bilateral consultations under the WTO dispute settlement procedures.
Measures taken
Japan requested bilateral consultations under the WTO dispute settlement procedures. Japan will continue making requests to Korea to abolish the AD measures under this framework.
Priorities
Republic of Korea: Correction of the AD Duty Measures on Pneumatic Valves
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Korea has failed to provide persuasive explanations concerning the effect of dumped imports on domestic prices (Articles 3.1
and 3.2 of the AD Agreements). Furthermore, there are defects in Korea’s determination of injury caused by dumped imports to domestic industries and causation (Articles 3.1, 3.2, 3.4 and 3.5 of the AD Agreements).
There are also procedural flaws in the investigations such as the failure to disclose essential facts (Article 6.9 of the AD Agreements).
Given these, the AD duty measures are highly likely to violate the AD Agreements.
Problems under international rules
Brazil: Discriminatory Implementation of Industrial Product Tax
(Note) Conditions and details of preferential treatments differ according to activities of companies ((1) Manufactures in Brazil, (2) Import sales companies, and (3) companies with investment plans)
In October 2012, the Brazilian government announced the continuation of the 30 p.p. increase in the IPI tax rate on automobiles for five years from 2013 to 2017. It also publicized a new policy in the automotive sector named INOVAR-AUTO, under which an up-to-30 p.p. tax reduction is granted for automobile manufacturers. The reduction is available with the use of IPI credits which correspond to the amount of domestic content used, once the manufacturers satisfy the conditions of (1) achieving the prescribed fuel efficiency standards; (2) implementing certain manufacturing processes in Brazil; and (3) investing in domestic R&D activities, etc. The Brazilian government also has introduced preferential taxation in the ICT sector.
The measure gives unfavorable treatments to imported products who do not receive the benefit of tax exemption. Accordingly, it is likely to be inconsistent with Article III (national treatment requirements) of the GATT. Also, it is likely to be inconsistent with Article III of the GATT, Article 2 of TRIMs, and Item (b), Paragraph 1 of Article 3 of the Agreement on Subsidies and Countervailing Measures in encouraging the usage of local contents.
1. Grant an exemption of IPI increase for certain time period for cars manufactured in Brazil by participating companies.
2. Allow reduction of IPI increase up to 30% for cars imported by participating companies up to 4,800 cars per year, in proportion to the local content usage etc..
(i) Achieving the prescribed fuel efficiency standards by October 2017 (for 2017 models, approx. 12% improvements from the level in 2012)
(ii) Implementing certain manufacturing processes (e.g., assembling and press working) in Brazil
(iii) Investing a certain amount of funds in R&D, innovation, engineering, etc. in Brazil
Conditions for participating in the Inovar−Auto Preferential tax treatment to participating companies
Japan, jointly with the United States, the EU, and Australia, expressed concerns at the WTO Council on Trade in Goods, the Committee on Trade-Related Investment Measures (TRIMs), etc. In addition, the Japanese Minister of Economy, Trade and Industry pointed out to the Brazilian Minister of Development, Commerce and Industry the possible infringement of the WTO rules in May and November 2012, respectively. Also, Japan continuously expressed concerns at the Japan-Brazil Joint Committee on Promoting Trade and Investment (in November 2012, October 2013, and September 2014, respectively).
On July 2, 2015, Japan requested consultations with Brazil and had consultations on September 15 and 16. On September 17, 2015, Japan requested the establishment of a panel. The panel was established in the same month. * In October 2014, the EU had requested the establishment of a panel against Brazil, and the panel was established in December 2014 (Japan participated as a third party). As
Japan also requested the establishment of a panel, the proceedings for the both panels were harmonised.
Japan requested the establishment of a panel under the WTO dispute settlement mechanism. Japan will continue requesting withdrawal/modification of these measures under this framework.
Priorities
Summary of measures
Measures taken
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(3) Issues on which Japan urges prompt implementation of the WTO
recommendations
China: Elimination of AD Duty Measures on High-performance Stainless Steel Seamless Tubes Manufactured in Japan (mentioned above)
September 8 2011 MOFCOM gave a public notice of the initiation of AD investigation. November 8 2012 MOFCOM gave a public notice of the final determination. December 20 2012 The Japanese government requested consultations with the Chinese government under the WTO Agreements. January 31 2013 Japan and China conducted bilateral consultation in Tokyo (EU requested to join the consultations) April 11 2013 The Japanese government requested the establishment of a panel under the WTO Agreements. August 16 2013 EU requested the establishment of a panel and the panel was established in the same month. February 13, 2015 The panel report was distributed to Member countries, recognizing that the China's AD measures are inconsistent
with the WTO Anti-Dumping Agreements with respect to the determination of injury and causation as well as procedures. May 20, 2015 Japan notified the DSB of its decision to appeal certain issues addressed by the panel, including the interpretation of Articles 3.2
and 3.4. China also appealed certain issues. October 14, 2015 The Appellate Body circulated to the Members its report which fully accepted Japan’s claims.
In October 2015, the Appellate Body circulated its report that fully upheld Japan’s claims, ruling that China’s measures violate the WTO Agreement. Japan requests China to withdraw/modify these measures promptly.
Priorities
On November 8, 2012, Chinese Ministry of Commerce (MOFCOM) gave a public notice of the final determination to impose the anti-dumping (AD) measures (AD duties to be imposed in the coming 5 years) regarding the AD investigation on Japanese and EU high-performance stainless steel seamless tubes.
The AD measures are highly likely to be inconsistent with the WTO AD Agreements because of (i) flaws in the determination of injury and causation (almost all Japanese products are high-grade steel used in ultra supercritical boilers in coal-fired power plants, but injury and causation were determined in spite of the fact that Japanese and Chinese products do not compete and Japanese imports do not seem to cause any injury to the Chinese domestic industry), and (ii) flaws in investigation procedures such as insufficient disclosure of essential facts.
Summary of measures
Background
Injury and causation • The Appellate Body upheld the findings by the panel that China’s AD measures were inconsistent with Article 3.5 of the AD Agreement because China
failed to take into account differences in performance, grade and usage between high-performance products from Japan and Chinese products in establishing injury and causal link .
• The Appellate Body also found that China failed to take into account the aforementioned differences in examining the effect of dumped imports on domestic prices (Article 3.2) and their impact on the state of the domestic industry (Article 3.4), and violated Articles 3.2 and 3.4 of the AD Agreement. Procedurural issues • The Appellate Body upheld the finding by the panel that China’s AD measures were inconsistent with the AD Agreements due to defects concerning the
treatment of confidential information (China’s appeal was dismissed).
Rulings by the Panel
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After the global financial crisis in 2008, Argentina introduced non-automatic licenses (targeting 400 items on the basis of HS codes). The number of items subject to the system was increased to 600 in February 2011. In many cases, it took 100 days or more to issue an import
license, and as a result, export from Japanese companies to Argentina has been delayed (Export of automobiles, their parts, motorcycles, cell phones, PCs, tires etc. has been affected).
Moreover, trade balancing requirements (requiring one-dollar export as a condition for one-dollar import) and prior import declaration requirements were introduced for importers, with the effect of restricting imports.
Although there has been some limited progress including the abolition of non-automatic import licenses on January 26, 2013 (just before the establishment of the panel), other measures (trade balancing requirements and prior import declaration requirements) are still in place.
Argentina: Elimination of Import Restrictions (mentioned above)
At the end of December 2015, Argentina announced the abolition of the prior import declaration requirements (DJAI), but at the same time introduced a new licensing system. Japan will collect information on this new system and will request proper correction of measures, together with the United States and the EU.
Priorities
In December 2012, Japan, jointly with the United States and the EU, requested establishment of a panel. The panel was established in January 2013. In August 2014, the panel issued the final report completely affirming the arguments by Japan, the United States, and the EU. In September 2014, Argentina appealed. In October of the same year, Japan and the EU cross-appealed. In January 2015, the Appellate Body published a report to support the panel's final report, ruling that the Argentina's import restriction measures (trade balancing
requirements and prior import declaration requirements) are inconsistent with Article XI:1 of the GATT (general elimination of quantitative restrictions). On December 31, 2015, Argentina simultaneously announced the abolition of the prior import declaration requirements and the introduction of a new import
licensing system (SIMI). The SIMI includes non-automatic licensing (for 1,000 items) and it is not clear what items are an improvement over the DJIA. Therefore, Japan will continue collecting information and monitoring so that Argentina will surely correct these measures.
Background
Summary of measures
Trade Balancing Requirements These are non-written measures implemented based on verbal guidance. However, various evidence, such as documents released by the government and affidavits submitted by companies, show that there exist systematic and ongoing measures in which trade balancing requirements are imposed based on Argentine's policies aimed at constraining imports and reducing trade deficits. The requirements are inconsistent with Article XI:1 of the GATT because they constitute import restrictions in that compliance with the trade balancing requirements is a precondition for import and that no written document is available, which leads to a lack of transparency and predictability.
Prior Import Declaration Requirements The requirements are inconsistent with Article XI:1 of the GATT because they constitute import restrictions in that the acquisition of prior import approval is a precondition for import and that the range and criteria of discretionary exercise of authority by the regulatory authorities, which participate in such requirement system and which can stop or delay the approval process, are unclear.
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Summary of the Appellate Body Report and the Panel Report
The United States used to apply the methodology known as zeroing when calculating a margin of dumping for each exporter. Under this methodology, the United States took into account only export prices lower than the normal value (domestic prices) and disregarded other prices. Through such arbitrary calculations, the United States recognized inflated margins of dumping for foreign exporters and imposed AD duties on that basis.
Japanese bearings industry has been imposed unjustified AD duties based on zeroing since 1989. For its annual export to the United States of about ¥11.6 billion, it is paying excessive AD duties of about ¥1(one) billion.
Summary of measures
1. Background up to the present In November 2004, Japan requested consultations with the United States under the WTO Agreements. In January 2007, the WTO Appellate Body made a determination that zeroing was inconsistent with the WTO agreements, and recommended the
United States to abolish it. In August 2009, the WTO Appellant Body determined that the United States had not implemented the WTO recommendations after their deadline. In February 2012, Japan and the United States agreed on a memorandum for resolution of this dispute. Based on the memorandum, the United
States amended the Department of Commerce regulation for abolition of zeroing.
2. Actions going forward Recently, the United States has been increasingly applying the second sentence of 2.4.2 of the AD Agreement (the clause concerning so-called targeted dumping, i.e. exports at low prices for specific customers, regions or time periods), and has resumed the application of zeroing based on its interpretation that zeroing should exceptionally be permitted under this clause, while expanding its scope of application. There are concerns that the ruling to prohibit zeroing may effectively be rendered inutile. South Korea and China have already referred the U.S. AD measures to the WTO dispute settlement procedures (US – Washing Machines (DS464); and US – Anti-Dumping Methodologies (China) (DS471)). Japan participated in these cases as a third party and is arguing that the use of zeroing by the United States violates the WTO Agreement. The panel in DS464 adopted an interpretation in line with Japan’s arguments and determined that the use of zeroing by the United States is inconsistent with the AD Agreement. Japan will continuously seek the abolition of zeroing through the WTO dispute settlement mechanism, including in DS471.
Background
In February 2012, Japan and the United States agreed on a memorandum. The United States amended the Department of Commerce regulation toward the abolition of zeroing. In March 2014, the United States revoked the AD duty order on ball bearings from Japan. Japan will continuously seek abolition of zeroing.
Priorities
United States: Zeroing
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Newly featured columns
Under the WTO dispute settlement mechanism, recommendations to correct measures
inconsistent with the WTO Agreements have been implemented at a high rate of approximately 90%.
Compulsory execution is not permitted and there are cases where parties may have incentives not to implement WTO recommendations.(*) However, WTO recommendations have been implemented voluntarily in many cases. The following factors are considered to underlie such high implementation rate.
(i) Institutional guarantee Due to the availability of countermeasures and monitoring by DSB, non-implementation would increase procedural burdens and damage the relevant country’s reputation.
(ii) Interchangeability of positions Non-implementation by a certain respondent country may provide an excuse to a future counterparty when such respondent country becomes a complainant in the future (this risk may be more realistic for countries that are highly likely to be complainants in the future)
(iii) Reliability and persuasiveness of determinations made by panels and the Appellate Body Panels and the Appellate Body have acquired reliability and persuasiveness through the accumulation of articulated precedents.
(iv) “Common interest” among member countries realized through the compliance with the WTO Agreements
All members’ compliance with the WTO rules, i.e., maintenance of stable order of free trade, realizes a win-win relationship among them.
New column (1): how implementation under WTO DS mechanism is ensured and reasons therefor
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(*) Such cases as where the involvement of assemblies is required for correcting the relevant measures or domestic procedures are otherwise burdensome, or where the relevant measures are based on the purposes of environmental preservation, consumer protection etc. that may give rise to an argument that discretion in imposing regulations should be broadly admitted
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(i) Requirements for invoking AD measures
In order to invoke AD measures, the authority of the importing country must determine injury and causal link based on positive evidence.
(ii) Necessity to consider competitive relationship between products in AD investigations
In recent years, emerging countries have been initiating an increasing number of AD investigations. In such cases, authorities tend to easily find injury to the domestic industry alleged to have been caused by dumped imports from Japan or other developed countries, although there is only insufficient competitive relationship between the imports with high value-added and the like domestic products in terms of their prices, usage and customers, etc. Therefore, it is important to strengthen disciplines on the injury analysis in order to ensure that authorities properly assess the competitive relationship between products.
(iii) Japan’s efforts to strengthen disciplines through formulating WTO precedent In order to deter authorities from invoking AD measures based on such sloppy analysis, Japan
has been making efforts to strengthen disciplines through formulating precedent by way of the WTO dispute settlement mechanism. In particular, the Appellate Body report in China – HP-SSST, which was circulated in October 2015, fully upheld Japan’s claims, clarifying the necessity to take into consideration appropriately differences between imported goods and domestic goods (i.e. existence or non-existence and levels of competitive relationship in the market) in the anti-dumping injury analysis.
New column (2): Consideration of competitive relationship between products in AD investigations - Strengthening disciplines on the injury analysis through WTO dispute settlement procedures -
Based on the understanding that industry support measures taken by emerging countries for their major industries are one of the causes of excess equipment, we will examine provisions of the Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) that are problematic in relation to emerging countries’ industry support measures and related judicial precedents.
(i) Current status and problems of the rules on subsidies •There is no consensus opinion as to whether government-owned companies are included in the Subsidies
Agreement. However, it remains questionable whether it should be allowed to exclude such companies supported by national governments from the scope of regulations.
• It should be noted that atypical subsidies other than grants and low-interest loans may be subject to the Subsidies Agreement.
(ii) Relation with the OECD Export Credit Arrangement Export credits consistent with the OECD Export Credit Arrangement under the Subsidies Agreement are permitted and developed countries follow these provisions. However, some emerging countries seem to grant export credits under easier conditions than these provisions and may be in violation of the Subsidies Agreement. It is important to continue encouraging emerging countries to join the OECD Export Credit Arrangement.
(iii) Significance of purposes of subsidy policies in rules on actionable subsidies Rules on actionable subsidies do not clearly provide for the necessity to take into consideration the purposes of subsidy policies, but it may be possible to construe that subsidies granted as a reasonable means for implementing legitimate policy purposes should be permitted under rules on subsidies.
(iv) Rules and recommendations concerning transparency of subsidies Some member countries are obliged to notify the WTO of their government subsidies but implementation status varies by country. Emerging countries may not even disclose the amount or other details of subsidies domestically in some cases, but encouraging them to disclose information and evaluate their systems will contribute to improving the finance of the relevant countries as well as the global economy as a whole.
New column (3): Rules on subsidies and industry support measures by emerging countries
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