(1) Response to economic globalization
(2) Prevention of dividing of the world economy into blocs
(3) Aiming for a comprehensive New Round
(4) Actively integrating developing countries into the multilateral trade system

(1) How to lay the groundwork during the 5th Ministerial Conference (MC5) for making the New Round a comprehensive one.
(2) Response to problems involving developing countries
(3) Agriculture
(4) Services
(5) Increasing the benefits Japan will gain through both the WTO and the FTA

(1) Problems involving developing countries

1. Improving market access
2. Stepping up capacity-building efforts
3. Issues that must be settled by the end of December
   Implementation, S&D, TRIPS and access to medicine (Response to countries without pharmaceutical production capability)

(2) Issues already in negotiation

1. Agriculture
2. Services
3. Non-agricultural market access
4. Rules
   Anti-Dumping (AD), Subsidies, Regional Trade Agreements
5. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
6. Trade and Environment
7. Review of Dispute Settlement Understanding

(3) Issues on which members will seek to launch negotiations during MC5

1. Trade and Investment
2. Competition
3. Trade Facilitation
4. Transparency in Government Procurement

(1) Response to economic globalization

As people and companies are engaged in business activities across national borders, a larger portion of national economies is affected by economic activities across national boarders today. Under such circumstances, it is an important task for the WTO to work out rules on orderly economic activities which conforms to the today's situation, and Japan will benefit from it. Specifically, the WTO should work out rules on investment and improve and work on rules on trade remedies, so that it would facilitate corporate activities and provide them with stability and efficiency. It should also work out rules which would ensure to allow protection of the environment and the safety of consumers rather than blindly pursue liberalization.

(2) Prevention of dividing the world economy into blocs

Expansion of free trade agreement (FTA) networks without progress in the WTO's efforts in liberalizing global trade and global common rule-making would allow to divide the world economy into blocs as a result of the formation of FTAs, which liberalize trade only among certain countries. This would adversely affect well-balanced development of the global economy. The mistake made in the 1930s must not be repeated. Only the sound and powerful WTO that holds up the principle of the most-favored-nation treatment can prevent the possible negative aspect of the FTAs - distorting international trade - and ensure the positive aspect of the FTAs - creating international trade. Even if Japan implements a policy of actively concluding free trade agreements with other countries, it cannot conclude such accords with all countries in the world. In order to avoid suffering from possible negative effects of trade distortion caused by FTAs to which Japan is not a signatory, it is in the interest of Japan to maintain the WTO which conforms to the today's situation and functions smoothly. To that end, it is indispensable to make the New Round a successful one. It is an urgent task to make progress in the New Round negotiations and lessen the structural risk which the WTO would bear if only FTAs make progress (for example, the most-favored-nation principle would become a dead letter).

(3) Member countries should aim to make the New Round a comprehensive one

In order that the round will produce a well-balanced results, from which Japan and many other countries can benefit, it is necessary not only to hold negotiations on agriculture and services, as agreed upon at the Uruguay Round, but also to improve non-agriculture market access (Japan has comparative advantage in many non-agriculture sectors), improve rules on trade remedies such as anti-dumping, and work out multilateral rules on investment and competition as well as rules on the relationship of environmental protection and trade liberalization. By doing so, adoption of abroad package by a single undertaking would be made possible striking out an overall balance.

(4) Member countries should help integrate developing countries into the multilateral trade and investment systemIt

It is necessary to facilitate Japanese companies' business activities by encouraging Mexico, China, the ASEAN and Latin American countries to participate in a freer and more transparent multilateral trade and investment system. Expansion of developing countries' markets will increase Japan's trade and investment opportunities. In particular, it is important to ensure that China, which has recently joined the WTO, will implement its commitments on market access, intellectual property rights, distribution services and so on.
Developing countries are insisting the revision (rebalancing) of the Uruguay Round agreements (especially, those on intellectual property rights, customs valuation, elimination of regulations on local content, and rules of origins) because they have been facing difficulties in their implementation phase ("Implementation-related issues"). Unless the WTO members properly tackle these issues, the New Round negotiations are likely to lose their momentum.
Developing countries in fact vary in terms of population and economic scale. Some countries rely on imports while others are active in exports. So they cannot be considered in a lump, and such aspect makes the issues related to developing members more complex.

(1) How the groundwork should be laid at the 5th Ministerial Conference (MC5) for making the round a comprehensive one?

The short-term task is to promote market access negotiations in a wide diversity of sectors - not only agriculture and services in which negotiations are already under way but also in non-agricultural sectors. In addition, it is also an important task to launch negotiations in "new areas" such as investment and competition and determine an appropriate scope of anti-dumping (AD) negotiations and make progress in negotiations on rules on trade and environment. It is important that the member countries will lay the groundwork for comprehensive negotiations by doing so.

(2) Response to problems involving developing countries

Developing countries - particularly those from the ASEAN and Africa - need to acquire the capacity to comply with WTO rules and benefit from it so that they can enjoy growth and development through trade. It could also generate problems in maintaining the order of the WTO, if the situation in which developing countries cannot comply with WTO rules remains untouched. Therefore, it is important for the WTO to help developing countries improve their capacity to comply with rules, and extend assistance to encourage them to actively participate in the negotiations, while keeping in mind that developing countries' capacity has its own limits. In this regard, it is indispensable for developed countries including Japan to provide sufficient technical assistance and capacity building to developing countries and to improve market access. To that end, it is important to extend not only assistance through international organizations but also bilateral assistance. If such assistance results in Japanese purchase of developing countries' goods and services that are not only reasonably cheap but also with quality which meets Japanese safety standards, Japanese consumers can benefit.
Moreover, in order to smoothly launch negotiations at MC5 on investment, competition, trade facilitation, and transparency in government procurement among other issues, it is necessary to extend effective assistance to developing countries in these fields.
At the same time, Japan will encourage developing countries to observe WTO rules and participate in the negotiations by showing the advantage of free trade based on its own experience of development through trade and investment and gaining their understandings. In this way, Japan aims at enlarging the market and promoting investment for its goods and services.

(3) Agriculture

Agricultural negotiations mainly consists of negotiations in three fields - export competition, market access, and domestic support, and it is important to ensure a good balance among these fields. In particular, market access and domestic support are of particular significance to Japan. It is necessary to maintain the minimum food self-sufficiency while continuing the reform process provided for by the Agreement on Agriculture that Japan and other members signed as a result of the Uruguay Round, promoting liberalization, and thereby improving that the entire domestic economic welfare, as well as to increase the efficiency of agriculture based on market mechanism, while maintaining our agricultural sector. To that end, Japan will aim to work out flexible rules that will allow it to continue its agricultural reform and ensure the coexistence of a wide variety of agriculture. As Japan has insisted for many years, it is necessary to reflect the non-trade concerns on negotiating modalities.

(4) Services

The service sector accounts for more than 60 percent of Japan's gross domestic product, and 60 to 70 percent of the economies of many other countries, particularly developed countries. The main goal of service negotiations is to expand export and investment opportunities for Japanese service providers, through further liberalization of the service market of WTO Members as well as development of multilateral rules on trade in services. At the same time, the negotiations are also expected, for Japan, to yield benefits towards revitalizing the economy and promoting consumer welfare, through introducing competition, improving efficiency and enhancing competitiveness in service sectors. For a successful New Round negotiations, it is vital to ensure active participation of larger number of developing countries, together with a substantial improvement in liberalization commitments of developed and major developing countries.

(5) Increasing Japan's benefit through both the WTO and FTAs

Japan aims to effectively achieve its policy goal by actively promoting free trade agreements (FTAs) as a means to supplement and strengthen the WTO. Specifically, Japan will seek negotiations at the WTO on issues that cannot be effectively addressed without enforcing global rules -- such as regulations on agricultural subsidies -- and issues that the international community as a whole must tackle -- such as further liberalization of the entire international trade with the aim of minimizing the distorting effects of regional trade agreements. On the other hand, Japan will seek FTA negotiations on more advanced liberalization with a focus on the characteristics of the regional economic relations and harmonization of economic systems as a "WTO-plus". In such a manner, FTAs will desirably go a step ahead of the WTO system. Japan is of the view that WTO and FTAs are not alternatives; rather, comprehensive negotiations should be simultaneously held at both FTAs and the WTO.

(1) APEC Ministerial Conference in Los Cabos on Oct. 23 and 24

Discussions are expected to be held from the viewpoint of what kind of contributions the Apec member economies can extend to make progress in the WTO process.

(2) WTO Mini-Ministerial Conference in Sydney on Nov. 14 and 15

Ministers from the member countries will discuss how to deal with developing countries-related issues (the "Implementation" issues, TRIPS and access to medicine, Special and Differential treatment (S&D), Capacity Building) toward the end of-December deadline.

(3) 2nd WTO Mini-Ministerial Conference early next year (planned)

Japan is of the view that political-level response to agriculture, services and non-agricultural market access is necessary because these issues will come to a turning point toward the end of March.

(4) WTO Mini-Ministerial Conferences to be held once or twice as necessary between next April and July

(5) 5th WTO Ministerial Conference in Cancun from September 10-14,2003

Japan aims at achieving the following points:

1. offers for negotiations on agriculture(commitment on tariffs and rules)
2. offers for negotiations on non-agricultural products
3. giving further impetus towards strengthening the disciplines in anti-dumping
4. Consensus to start negotiations on Singapore issues such as trade and investment

(1) Problems involving developing countries

1. Improvement of Market access
   Improvement of market access to developed countries particularly in the field of textile and agriculture is the most important matter of concern for developing countries, and cannot be ignored.
   Japan is determined to make efforts to provide Least Developed Countries' products with duty-free, quota-free access to the Japanese market, and will consider specific measures to exempt more LDC products from tariffs as part of the tariff schedule modification to be implemented next fiscal year.
2. Strengthening of capacity building
   Most WTO member countries are in favor of mainstreaming Trade-Related Capacity Building into bilateral and multilateral assistance. Japan also recognizes trade as one of the main pillars of its development policy and endeavors to tackle capacity building in the following two aspects: one is to increase the capacity to comply with international rules, mainly those of the WTO, and participate in negotiations; and the other is to enhance its long-term capacity to export.
3. Issues that must be settled by the end of December
   (Implementation-related issues)
   It is necessary to discuss how far the current rules can be maintained while responding to the demand made by developing countries that some rules provided for by the WTO agreement be relaxed.
   (S&D issue)
   Developing countries are insisting that the Special and Differential (S&D) Treatment provision should be revised to make it compulsory (Among the more than 85-point demands are the ones insisting that developing countries' special circumstances be taken into account in taking anti-dumping measures against them and in holding consultations to deal with disputes, and that LDC should be exempted from cuts in tariffs on agricultural products, etc.). It is necessary to discuss how far developing countries could be exempted from duties as a tentative measure and how far they could be allowed to extend a transitional period.
   (TRIPS and Public Health - response to countries with insufficient or no manufacturing capacities in the pharmaceutical sector)
   The main issue, for example, is how to provide less expensive anti-HIV/AIDS drug to developing countries - mainly least developed countries (mostly African countries) - with insufficient or no manufacturing capacities of anti-HIV/AIDS drug as part of measures against infectious diseases. Countries with sufficient manufacturing capacities in the pharmaceutical sector can produce anti-HIV/AIDS drugs developed by manufacturers in developed countries by exercising the compulsory license. However, Article 31 (f) of the TRIPS Agreement stipulates that other use of the subject matter of a patent without the authorization of the right holder shall be authorized predominantly for the supply of the domestic market, thereby making it difficult to export such drug to a third country. It is necessary to find an expeditious solution to this problem by the end of 2002 deadline.

(2) Issues that the member countries have agreed to negotiate

1. Agriculture
   The establishment of modalities is the most important issue that must be settled by March 31. For the time being, it is important to have Japan's opinions incorporated accurately and effectively in the Chairman's overview paper to be released on December 18, which will constitute the base for modalities.
2. Services
   The member countries are supposed to submit their initial offer to the WTO at the end of March next year for service market liberalization negotiations, based on which full-scale negotiations will be held. Special attention should be paid to negotiations on relaxation of the transfer of personnel (attorneys, architects, engineers, medical practitioners, nurses and information technology experts and other professionals), free-lance jobs and other business services, and energy that is a new field, in addition to computer-related business, telecommunications, construction, distribution, financial, and transportation sectors that are issues of particular concern for Japan.
3. Non-agricultural market access
   A variety of proposals are expected to be made on negotiation modality. The question is how tariffs will be lowered or eliminated, how tariff peaks and tariff escalations will be eliminated as demanded by developing countries, how high tariffs will be lowered as demanded by developed countries and how S&D treatment will be ensured for developing countries.
4. Rules
   (Anti-dumping - AD)
   The " AD Friends " group, comprising WTO members including Japan which aim to strengthen the disciplines in the AD Agreement, has submitted papers suggesting specific provisions in the AD agreement that should be clarified or improved. The important task is how to shape the discussions with the U.S. that is negative to amend the AD Agreement.
   Japan will aim to begin the work toward amendment to the AD Agreement prior to the MC5 and confirm to promote the work at the MC5.
   (Subsidies)
   As part of the " implementation " issue, various proposals have been submitted to the WTO, such as the one to loosely apply the agreement on subsidies to developing countries to a certain extent and the one to revive green subsidies that expired at the end of 1999. New Zealand, Australia and some other countries insist that fisheries subsidies should be scrapped or reduced because they are adversely affecting their trade, environment and development. Japan has been arguing that there are no reasons why special discipline should be applied to only fisheries subsidies.
   (Rules on regional trade agreements)
   The clarification of the terms "substantially all the trade" in GATT Article 24-8, "other regulations of commerce " in GATT Article 24-5 and " " substantial sectoral coverage" in GATS Article 5-1 will be discussed. Some countries are insisting that " substantially all the trade" should be based on the number of items traded while others are insisting that it should be based on the volume of trade. Japan needs to have discussions on the level of standards it should aim to work out, given the fact that major FTAs have achieved high-level of liberalization and minimized their effects of distorting trade. NAFTA has liberalized an average of more than 99 percent of its one-way trade and the FTA between EU and Mexico has liberalized an average of 97 percent of their trade.
5. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
   Article 23 of the TRIPS Agreement provides for additional protection for geographical indications for wines and spirits (for example, labeling wines produced in Yamanashi Prefecture as "Bordeaux wine" and "Bordeaux-style wine made in Yamanashi" is prohibited).
   In this regard, Member countries negotiate the establishment of a multilateral system of notification and registration of geographical indications for wines and spirits. However, there is a wide gap between EU and old continental countries insisting that legally binding rules should be enforced and new continental countries including the United States, Australia and Japan insisting on non-binding system.
   Moreover, old continental countries including the EU are demanding that the additional protection also cover a wider diversity of items other than wines and spirits (such as ham, cheese, rice and tea) while the United States, Australia and other new continental countries strongly oppose to the idea. Japan should determine its position on the issue by discussing both advantages and disadvantages of the extension of the additional protection.
6. Trade and Environment
   Relations between the existing WTO rules and trade obligations set out in multilateral environment agreements (MEAs) will be negotiated, partly because MEAs have been concluded since the 1970s and environment protection measures and trade measures are increasingly interrelated as symbolized by regulations on imports and exports for the protection of species on the verge of extinction, biodiversity, and the control of harmful chemical substances. The issue was brought up as a subject of negotiation for the first time in the New Round, with the objective of ensuring consistency between the trade and environmental rules.
   However, there is a gap between the EU and Switzerland, which place an emphasis on environment, Japan which support the clarification of the relationship between the two sets of rules in order to enhance the legal stability and predictability, and developing countries and others which fear that too much emphasis on environmental protection may distort trade.
7. Review of Dispute Settlement Understanding
   Negotiations on the review of Dispute Settlement Understanding (DSU) aim to conclude their discussions by May 2003, and this negotiation process is separated from other single-undertaking negotiation package. Together with other Members, Japan has proposed that the DSU should be amended so that a complaining country may be allowed to take countermeasures only after a separate panel finds the Member concerned has not complied with the recommendations or rulings of the Dispute Settlement Body. Japan will make every effort for realization of this proposal. So far many proposals have been submitted to the negotiations. Those include making the panel a permanent body, improvement in transparency in the dispute settlement process, and speeding up the process.

(3) Issues on which Japan will aim to launch negotiations at the MC5

1. Trade and Investment
   The focal point is how to gain clear consensus on negotiation modality at the MC5 and launch negotiations as the United States are at odds with many countries over multilateral investment rules and developing countries that are opposed to launching such negotiations. The main points to be discussed are 1) whether to limit investments to be covered by an investment agreement to direct investments; 2) whether indiscrimination (national treatment and most-favored-nation treatment) should be required even before investment points are established; and 3) what kind of provisions should be incorporated in the agreement to give consideration to the development of countries that accept investments.
2. Competition
   Japan, the EU, Canada, and other countries that are aiming to create multilateral rules on competition are in conflict with developing countries including India that claim that such multilateral rule is unnecessary. Under the circumstances, the question is how to gain explicit consensus on modalities of negotiations and launch negotiations on the issue. The main points to be discussed are 1) whether competition rules should be binding or nonbinding; 2) whether competition rules should be multilateral or plurilateral; and 3) whether a dispute settlement system or peer review system should be applied.
3. Trade facilitation
   Trade facilitation will be discussed with a view to creating possible rules in the future so that export and import procedures such as customs clearance will not hinder trade. GATT Article 5 (Freedom of Transit), Article 8 (Fees and Formalities connected with Importation and Exportation) and Article 10 (Publication and Administration of Trade Regulations) will be clarified and discussions will be held on identification of developing countries' needs for trade facilitation, and implementation of technical assistance and capacity building.
4. Transparency in government procurement
   The goal in the field of transparency in government procurement is to launch negotiations to work out multilateral agreement aimed at ensuring transparency in government procurement among the WTO member countries. The main points to be discussed are 1) the scope of procurement to be covered by the agreement (whether local governments' procurement and government procurement of services should also be covered by the agreement) and 2) whether a dispute settlement system should be utilized and whether a complaint procedure should be established at each of the member countries.