Japan’s 2014 Trade Compliance Report

In May 2014, Japan’s Ministry of Economy, Trade and Industry (METI) issued its “2014 Report on Compliance by Major Trading Partners with Trade Agreements – WTO, EPA/FTA, and IIA –“. The report, which has been issued annually since 1992, assesses Japan’s trading partners compliance with WTO agreements and its bilateral agreements (economic partnership agreements (EPA), free trade agreements (FTA) and investment agreements (IIA)). Japan’s compliance report is its version of the U.S. National Trade Estimate Report on Foreign Trade Barriers (NTE), which is published annually as “a companion piece to the President’s Trade Policy Agenda” by the Office of the U.S. Trade Representative (USTR). The 2014 NTE identifies major trade barriers to U.S. exports in more than 60 countries. In contrast to the NTE, the Japan Report lists only 16 countries or territories. New Measures: In its 2014 report, Japan identified 123 policies or measures that it considers to be actual or potential inconsistencies with international rules. But, most were carried over from its prior reports. In 2014, Japan added only eight new measures:

• China’s violation of WTO tariff concessions on photographic film in rolls
• Indonesia’s local content requirement in the retail sector
• Indonesia’s non-fulfillment of certain intellectual property-related obligations under the Japan-Indonesia FTA
• European Union’s Biocidal Products Regulation (BPR)
• Republic of Korea’s Act on Registration and Evaluation of Chemical Substances
• Russian Federation’s violation of WTO tariff concessions on refrigerator and other products
• India’s Food Security Act
• Ukraine’s recycling fee on motor vehicles

Priorities: From its list of potential or actual inconsistent measures, METI selects priority issues, which it separates into three categories. One category lists issues to be resolved through consultations or possible use of the WTO Dispute Settlement Mechanism. The other two categories cover issues that have been referred to the WTO Dispute Settlement Mechanism, where some are pending action and others are in the process of implementation of WTO recommendations. METI’s latest priorities are set out in “METI Priorities Based on the 2014 Report”. They include:

• Indonesia’s export restrictions on mineral resources, which include a ban on the export of unprocessed ore, extension of a ban on the export of copper until 2017 and a requirement that producers allocate a certain minimum percentage of their total production and sales to the domestic market.

• Indonesia’s new Trade Act and Industries Act, which Japan contends may not be consistent with its WTO obligations. Among the provisions of concern in the new Trade Act are local content requirements and a ban or restrictions on imports and exports. Provisions of the new Industries Act that may be inconsistent with WTO agreements include a ban or restrictions on export of natural resources, local content requirements and requirements to transfer technology in certain technology procurements.

•  Russian Federation’s violation of its WTO obligations by imposing tariff rates for around 200 items, including cheese, pulp and secondhand cars, which exceed its bound rates, the rates that it committed it would not exceed when it joined the WTO in 2012.

• Brazil’s discriminatory implementation of its industrial product tax, which treats imported products unfavorably with respect to tax exemption and local content requirements.

• China’s determination to impose anti-dumping duties on Japanese high-performance stainless steel seamless tubes.

• Argentina’s import restrictions on a wide range of items.

• Ukraine’s imposition of safeguard measures against automobiles. Japan has taken this issue to the WTO dispute settlement process and panel has been established.

Achievements:  In addition to identifying its priorities, the Japan report also noted achievements. One was the agreement between the U.S. and Japan to settle their dispute over the U.S. use of a calculation method known as “zeroing” in its imposition of anti-dumping duties. Another achievement was a WTO dispute settlement panel report that found China’s export restrictions on rare earth metals violated its WTO obligations. Another achievement cited by the report was the WTO Appellate Body’s report relating to Canada’s local content requirements under Ontario’s Feed-in Tariff Program. In addition to its priorities, METI has noted that it is adding two areas to its analysis. One involves the growing global problem of the distribution of counterfeit goods from China and the related lack of effective enforcement of intellectual property rights in many countries. In addition, METI will  be examining the compliance of resource-rich WTO members with their WTO obligations to ensure that Japan’s import dependence on foreign resources and energy is not impacted. While METI’s trade compliance report is more limited in scope than the U.S. NTE report, it provides a useful window into Japan's priorities with respect to the policies and practices of its trading partners and Japan's plans to address its concerns. Jean Heilman Grier June 30, 2014