Diplomatic Bluebook 2020

Chapter 3

Japan's Foreign Policy to Promote National and Global Interests

2 Rule-Making to Bolster Free and Open Global Economic Systems

(1) Promotion of Economic Partnerships

Economic Partnership Agreements (EPAs)1 and Free Trade Agreements (FTAs)2 help capture the vitality of the growing markets overseas and strengthen the basis of the Japanese economy, through measures such as the reduction or elimination of tariffs on goods as well as barriers on trade in services, and through rule-making for trade and investment. To date, the Government of Japan has signed 18 EPAs and FTAs with 21 countries and regions, all of which have entered into force. The EPA/FTA ratio in Japan's trade (the ratio of trade value with countries which have FTAs already signed or entered into force with Japan, to that of total trade value) was 51.6% at the end of December 2019, which reached 86.2% when including the trade value of countries and regions with EPAs and FTAs in negotiations. Following on the enactment of TPP113 on December 30, 2018, the Japan-EU EPA entered into force on February 1, 2019. The First Protocol to Amend the Agreement on Comprehensive Economic Partnership among Japan and Member States of the Association of Southeast Asian Nations (AJCEP) was signed by Japan on February 27, the nine ASEAN nations on March 2, and Viet Nam on April 24, as a result of many years of tireless negotiations.

As a flag bearer of free trade, Japan will work toward the steady implementation and expansion of the TPP11 Agreement as well as the steady implementation of the Japan-EU EPA, while promoting global trade liberalization through negotiations of other EPAs.

Japan's Initiatives on Economic Partnership Agreement (EPA/FTA) (as of March 2020)

  • 1 Economic Partnership Agreements (EPAs) are agreements that aim to create rules concerning trade liberalization, investment, the movement of people, intellectual property protection, and competition policy, and seek to strengthen wide-ranging economic relationships by providing for, among other things, factors for cooperation in various fields.
  • 2 Free Trade Agreements (FTAs) are agreements that aim to reduce or eliminate tariffs on goods or trade in service barriers among specified countries or regions.
  • 3 TPP11: Comprehensive and Progressive Agreement for Trans-Pacific Partnership
A TPP11 Agreement, Japan-EU EPA, RCEP, Japan-China-ROK Free Trade Agreement, and FTAAP
(A) TPP11 Agreement

The TPP11 Agreement is an effort to establish new economic integration rules for the 21st century in a wide range of areas such as tariffs, services, investments, intellectual property, and state-owned enterprises in the fast-growing Asia-Pacific region. It will provide Japanese companies an opportunity to be more active in markets overseas and will be a major driving force for economic growth in Japan. Furthermore, the strengthening of the interdependent relations in economic terms with countries that share fundamental values through the TPP11 Agreement has great strategic significance for the security of Japan and the stability of the Asia-Pacific region, leading to peace and prosperity in the region and the world at large.

The 12 countries of Japan, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S., and Viet Nam signed the TPP12 Agreement in February 2016, but the U.S. announced its withdrawal from the TPP12 Agreement in January 2017. As such, Japan proactively led the discussions in order to bring about the early realization of the TPP as soon as possible among the 11 countries. As a result, at the TPP Ministerial Meeting held in Da Nang, Viet Nam in November 2017, the Ministers agreed to move forward with the TPP11 Agreement among 11 countries, by incorporating the articles of the original TPP12 Agreement drawn up by the 12 countries into the new TPP11 Agreement, while exceptionally suspending the application of certain articles (agreement in principle). Later, in March 2018, the TPP11 Agreement was signed in Santiago, Chile. Mexico, Japan, Singapore, New Zealand, Canada, and Australia completed necessary domestic procedures and the Agreement entered into force on December 30. Viet Nam became the seventh Party to conclude the Agreement in January 2019.

TPP11 Agreement signing (March 8, 2018, Santiago, Chile; Photo: TPP Headquarters at the Cabinet Secretariat Office)TPP11 Agreement signing (March 8, 2018, Santiago, Chile; Photo: TPP Headquarters at the Cabinet Secretariat Office)

Amidst the spread of protectionist sentiments around the world, this sends a strong message to the world that Japan is committed to promoting free trade, and is a major step toward extending the free, fair, and modern trade of the 21st century, and investment rules in the Asia-Pacific region.

In addition, Japan became the TPP Chair in January and hosted the First Commission of the TPP at the ministerial-level (with Minister Motegi, then in charge of Economic Revitalization, serving as Chair). Decisions were made about four subjects at the meeting; matters concerning administration, accession process of the TPP11 Agreement, rules for resolving disputes involving Parties to TPP11, and about a code of conduct for investor-State dispute settlement. At the second meeting of the TPP Commission, held in October in Auckland (New Zealand), two decisions were made that concerned rules for TPP Commission procedures (rules of procedure concerning execution of Commission activities, including the process for conducting meetings and planning agendas) and for establishing a Roster of Panel Chairs (subcommittee) for dispute resolution. Japan will continue to take the lead on discussions toward the implementation and expansion of the TPP11 Agreement.

(B) Japan-EU EPA

The Japan-EU Economic Partnership Agreement (EPA) entered into force on February 1. Along with realizing a high-level elimination or reduction of tariffs, it also serves as a model for the 21st century's modern economic order based on free and fair rules. Almost six years since negotiations for the agreement started in April 2013, a giant economic zone was created comprising 600 million people and 30% of the world's GDP.

While Japan and the EU are geographically distant from one another, they have forged collaborative relationships in numerous fields as important global partners sharing the same basic values. With the enactment of this agreement, Japan-EU relations take a new step forward, supported by a legal foundation for strengthening collaboration. It is expected that trade, investment, and people-to-people exchange between Japan and the EU will become more active than ever leading to closer relations among the citizens of Japan and the EU. One of the concreate examples is the fairs related to the Japan-EU EPA organized by numerous retailers and restaurants followed by the agreement's enactment, which has showed the real advantages of the agreement to SMEs and consumers (see the Column on page 269).

At the First Japan-EU Joint Committee meeting held in April, participants mutually confirmed the levels of agreement implementation and discussed possible further ways for Japan-EU future collaboration, expressed by the slogan “Beyond EPA, beyond trade.” Japan and the EU are working to strengthen their multilayered collaboration to address various issues through 12 specialized committees and working groups as well as existing policy dialogues among authorities and public-private initiatives.

First Joint Committee of the Japan-EU EPA (April 10, Tokyo)First Joint Committee of the Japan-EU EPA (April 10, Tokyo)

Achievement of Target and Promotional Activities for Exporting Japanese Beef: Entering into Force of the TPP11 Agreement and Japan-EU EPA

Suneya Masahiko

Secretary-General, Japan Livestock Products Export Promotion Council Secretariat

QR code integrated with the “Universal Wagyu Mark”QR code integrated with the “Universal Wagyu Mark”

Under the government's target of expanding Japan's value of exports for agricultural, forestry, and fisheries products as well as food products to 1 trillion yen in 2019, the Japan Livestock Products Export Promotion Council Secretariat (J-LEC) is engaged in relevant activities through five export committees for beef, pork, chicken, egg, and milk and dairy products. Among these products, the target export value of 14 billion yen for milk and dairy products was achieved in 2018, and the target export value of 25 billion yen for beef was achieved in November 2019. Wagyu beef, a variety of beef that is produced in Japan, has now become synonymous with high-quality beef and has a growing reputation around the world as luxury food.

The framework that supports trust in Japanese beef comprises elements such as a pedigree registration system with a more than 100-year history for Wagyu beef, a traceability system based on the law, and a proprietary meat rating system. This framework is the decisive factor that differentiates Japanese Wagyu beef from “WAGYU” beef produced in other countries.

The J-LEC has established the “Universal Wagyu Mark” as an indication of Wagyu beef produced in Japan, and has conducted Wagyu seminars in various countries. At these seminars, crowds throng in once the sampling session begins. Cutting techniques that brings out the unique appeal of Japan-produced Wagyu beef, including the artistic beauty of its marbling and its unique fragrance and soft texture, as well as a menu that reflects the food culture of Japan, are also indispensable. The J-LEC also provides support by inviting overseas stakeholders in the industry and dispatching experts for activities such as domestic training programs in cutting techniques, on-site visits, and exchange of opinions with those involved in the industry.

The tireless business development efforts by the beef production industry in Japan as well as initiatives by the J-LEC, including the Beef Export Committee, have resulted in the steady expansion of Japanese beef exports, while the majority of exports is bound for Asia in terms of export volumes by country and region. The TPP11 Agreement, the Japan-EU EPA, and the Japan-U.S. Trade Agreement entered into force in 2018, 2019, and 2020 respectively. The value of exports to the EU for the ten-month period after the Japan-EU EPA entered into force (February to November 2019) showed a 28% year-on-year growth. Furthermore, the value of exports to countries that joined the TPP11 Agreement after it entered into force also shows an increasing trend for each country, with the value of exports to Canada growing by 8% year-on-year for instance. The effects of the agreements, such as the immediate abolition of tariffs on beef as a result of the Japan-EU EPA and the reduction in tariffs as a result of the TPP11 Agreement and the Japan-U.S. Trade Agreement, are expected to further expand exports not only to Asia but also to Europe and the U.S.

In the Asian market, certification marks that are similar to the “Universal Wagyu Mark” have emerged on the back of the popularity of Japanese Wagyu beef. In addition, in luxury beef markets in different parts of the world such as Europe, the U.S., and the Middle East, brand awareness of Japanese Wagyu beef─which entered the market later─is still relatively lower than that of “WAGYU” beef produced overseas. Moreover, with the strong consciousness of terroir (referring to environmental factors that characterize the habitat of food production) in Europe, there are also strong calls for the provision of accurate and detailed information.

In response, the QR code that describes the individual identification numbers of cattle was integrated with the “Universal Wagyu Mark” in June 2019, and a system that provides quality information on the spot, such as individual identification, registration, and rating, as well as unique information on individual suppliers, was launched as a model project. This system is scheduled to enter full-scale operation from FY2020.

The Japan-EU EPA includes provisions on the mutual protection of a geographical indication (GI), which is a system that protects the name of specialty products unique to the respective production-area, by registering them as intellectual property. Such provisions strengthen the protection of the Japanese Wagyu beef brand in the EU, and are expected to enhance its differentiation from other products.

Moves to resume beef exports to China are currently attracting the greatest attention among various export strategies for respective countries. There are growing expectations of the market potential not only on the Japanese side, but also on the Chinese side. With the signing of the Japan-China Agreement on Cooperation in Animal Health and Quarantine in November 2018 and other developments, the acceleration of negotiations with a view to resume Japanese beef exports, including Wagyu beef, is anticipated.

In order to further protect the brand of Japanese Wagyu beef and expand its market, in addition to the initiatives that have been implemented to date, we are facing the urgent task of establishing a supply system that can meet global demand. This can be achieved by promoting compliance with Standards of Rearing Hygiene Management and HACCP* certification for farms, as well as by increasing the number of Wagyu beef cattle and expanding HACCP-compliant meat processing facilities for export. Furthermore, in order to realize stable production and export of Japanese Wagyu beef, it is also important to prevent the invasion of virulent, infectious diseases from overseas, such as foot-and-mouth disease, through a complete and secure animal quarantine system. To that end, the J-LEC will cooperate closely with the government's proactive economic diplomacy to work on each and every possible measure.

  • *A method for hygiene control to ensure the safety of products and management procedures that are particularly important for eliminating or mitigating hazards in all processes, from the procurement of raw materials to the shipment of products, based upon an understanding by the food (or other products) business operator of hazards such as contamination by food poisoning bacterium or foreign substances.
(C) Regional Comprehensive Economic Partnership (RCEP)

The RCEP is a pillar of East Asian economic integration, aimed at realizing the establishment of an integrated economic zone that covers approximately half of the world's population, and about 30% of the world's gross domestic product (GDP) and total trade amount. Since the launch of negotiations in May 2013, the Association of Southeast Asian Nations (ASEAN) member states and their FTA partner states (six countries, namely Japan, China, the ROK, Australia, New Zealand and India) have been working together to advance negotiations toward a comprehensive and high-level agreement in areas that include trade in goods, trade in services, investment, competition, rules of origin, intellectual property, and electronic commerce, and customs procedures and trade facilitation. As of December 2019, 19 ministerial meetings and 28 rounds of have been held. At the 3rd RCEP Summit Meeting held in November in conjunction with the ASEAN-related Summit Meetings, leaders of 16 RCEP Participating Countries (RPCs) released the Joint Leaders' Statement on the RCEP. The statement noted that the 15 RPCs have concluded text-based negotiations for all 20 chapters4 and essentially all their market access issues, and tasked legal scrubbing by them to commence for signing the RCEP Agreement in 2020. RPCs also agreed to work together to resolve outstanding unresolved issues concerning India. Japan will continue to play a leading role, following the Joint Leaders' Statement.

  • 4 1) Initial Provisions and General Definitions; 2) Trade in Goods; 3) Rules of Origin, including Annex on Product Specific Rules; 4) Customs Procedures and Trade Facilitation; 5) Sanitary and Phytosanitary Measures; 6) Standards, Technical Regulations and Conformity Assessment Procedures; 7) Trade Remedies; 8) Trade in Services, including Annexes on Financial Services, Telecommunication Services, and Professional Services; 9) Movement of Natural Persons; 10) Investment; 11) Intellectual Property; 12) Electronic Commerce; 13) Competition; 14) Small and Medium Enterprises; 15) Economic and Technical Cooperation; 16) Government Procurement; 17) General Provisions and Exceptions; 18) Institutional Provisions; 19) Dispute Settlement; and 20) Final Provisions.
(D) Japan-China-ROK FTA

The Japan-China-ROK FTA is a negotiation with Japan's major trading partners: China and the ROK. The negotiations were launched in March 2013, and 16 rounds of negotiations were held by December 2019. The three countries have been engaged in discussions over a wide range of areas including trade in goods, investment, trade in services, competition, intellectual property, and electronic commerce, with the shared objective of pursuing a comprehensive, high quality, and mutually beneficial FTA.

(E) Free Trade Area of the Asia-Pacific (FTAAP) Concept

Discussions are being held at the meetings of the Asia-Pacific Economic Cooperation (APEC) on next-generation trade and investment issues to be addressed, and capacity building programs mainly for developing economies (countries and regions) are being implemented. The Lima Declaration on the FTAAP adopted at the 2016 APEC Economic Leaders' Meeting confirmed mainly the following three points: (1) the FTAAP should be high quality and comprehensive, and incorporate and address next-generation trade and investment issues, and it should be built on the TPP11 Agreement, the RCEP, and other agreements as the pathway; (2) APEC would begin on implementing the work programs supporting capacity building aimed at promoting the realization of FTAAP; and (3) progress made toward realizing the FTAAP would be reported to the Leaders in 2018 and 2020.

Following workshops in 2017 and 2018, Japan held a workshop on “competition chapters” in the FTAs and EPAs in 2019, with the goal of capacity building of developing economies in APEC. Through the sharing of successful cases, particularly from the perspective of regulations, with regard to “desirable and optional elements” in competition chapters, Japan has provided capacity building support for FTAs and EPAs policy makers and negotiators.

From the viewpoint of achieving a comprehensive and high-quality FTAAP, it is significant that the TPP11 Agreement entered into force at the end of December 2018 and that negotiations are progressing toward the early signing of the RCEP Agreement.

B Bilateral and Other Agreements
(A) EPAs Currently Being Negotiated
a Turkey

As an important country that serves as a hub among Europe, the Middle East, the Central Asia and Caucasus region, and Africa, Turkey has considerable economic potential and is attracting attention as a production base for exports to surrounding regions. The country has signed FTAs with over 20 countries and regions, and the need for developing conditions of competition for Japanese companies through the conclusion of the current EPA has been recognized. Furthermore, business communities in both countries have high expectations for the early conclusion of an EPA between the two countries. The leaders of Japan and Turkey agreed to launch EPA negotiations at the summit meeting in January 2014, and 17 rounds of negotiations had been held as of the end of December, 2019.

b Colombia

In December 2012, Japan began the EPA negotiations with Colombia, a country with rich natural resources and high economic growth. Colombia has concluded FTAs with several countries (the U.S., Canada, the EU, the ROK, etc.), and there is a growing need to regulate the competitive environment for Japan as well. The strengthening of bilateral relations through the conclusion of an EPA is expected to lead to improved cooperation in the international arena and promote cooperation among Japan and the Pacific Alliance (Mexico, Colombia, Peru, and Chile). 13 rounds of negotiations have been held to date.

(B) Suspended EPA and FTA Negotiations

Japan and the ROK are the third largest trading partners with each other. Based on the recognition that EPA negotiations with the ROK will provide both countries with a stable economic framework and bring about benefits for the future, both countries launched negotiations in 2003 but they have been suspended since 2004.

b Gulf Cooperation Council (GCC)

For Japan, the GCC member states (the six countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) constitute one of the most important regions as an oil and natural gas supplier and an important market for exporting infrastructure, among others. The Japan-GCC FTA negotiations were launched in 2006 to reinforce economic ties with GCC member states, but they have been suspended since 2009 on the grounds of the GCC side.

c Canada

In 2012, Japan launched EPA negotiations with Canada, with which Japan shares fundamental values and has a complementary economic relationship. Seven rounds of negotiation meetings had been held by November 2014, in order to achieve an EPA that can contribute to a stable supply of energy, minerals and food to Japan. However, since the TPP11 Agreement entered into force with six countries including Japan and Canada on December 30, 2018, the EPA negotiations between the two countries have not been held.

(C) Existing EPAs

The existing EPAs contain provisions concerning the joint committee, which is a body that discusses the implementation of the agreements, and a process to review the agreements after a certain period of time since their entry into force. In addition, a variety of consultations are being held in order to smoothly implement these existing EPAs.

C Movement of Natural Persons

In accordance with the EPAs, Japan has been accepting candidates for nurses and certified care workers from Indonesia, the Philippines, and Viet Nam. In 2019, 335 Indonesians (38 nurses and 297 care workers), 330 Filipinos (42 nurses and 288 care workers), and 217 Vietnamese (41 nurses and 176 care workers) were accepted into Japan. 2018 also saw 69 nurses (15 Indonesians, 31 Filipinos, and 23 Vietnamese) and 266 care workers (78 Indonesians, 95 Filipinos, and 93 Vietnamese) pass the national examination. A total of more than 400 nurses and 950 certified care workers have passed the exam as of the end of FY2018.

D Investment Treaties, Tax Conventions and Agreements on Social Security
(A) Investment Treaties

Investment treaties constitute an important legal basis to promote investments, by stipulating the protection of investors and their investment property, enhancement of transparency in regulations, expansion of investment opportunities, procedures for investment dispute settlement, and other matters. In order to promote the improvement of the investment environment overseas and to attract foreign investment to the Japanese market, Japan has actively engaged in concluding investment treaties.

In May 2019, the Japan-Armenia Investment Treaty entered into force. As of the end of December 2019, there are currently 44 investment-related treaties that have entered into force (30 investment treaties and 14 EPAs), and five (three investment treaties and two EPAs) that have been signed but not yet entered into force, bringing the total to 49, covering 76 economies. Including investment-related treaties that are currently under negotiation, 94 economies and around 93% of Japan's direct investments overseas will be covered (as of the end of December 2019).5

Current investment-related treaties (as of March 2020)

  • 5 Regional balance of Direct Investment (Assets), Ministry of Finance (All regions)
(B) Tax Conventions

Tax conventions are intended to eliminate international double taxation in cross-border economic activities (e.g. to reduce or exempt withholding taxes imposed on investment income such as dividends), or to prevent tax evasion or avoidance, and provide an important legal basis for promoting sound investment and economic exchange between the two countries. Japan is actively working in line with the Government's policy that “the Government will expand tax treaty networks, both in terms of quality and quantity, that are necessary for supporting the sound overseas business expansion of Japanese companies, through the conclusion of new treaties with countries/regions where investment relations with Japan are expected to develop, as well as amending existing treaties.” (“Growth Strategy 2019” (Cabinet decision, June 21, 2019)).

Entering into force in 2019 were a new (completely revised) tax treaty with Belgium in January, a revised protocol to the tax treaty with the U.S. in August, a tax convention with Croatia in September, and a tax treaty with Ecuador in December. Additionally, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Convention to Implement Measures to Prevent BEPS) entered into force for Japan. Meanwhile, Japan signed tax treaties with Argentina in June, Uruguay in September, Peru in November, Jamaica in December, and Uzbekistan (new, completely revised treaty) in December. Negotiations for tax treaties reached an agreement in principle with Morocco in September and Serbia in November. As of the end of 2019, Japan has signed 76 tax conventions that apply to 135 economies.

(C) Agreements on Social Security

Agreements on social security aim to resolve the issues of social security insurance premium double payment and annuity insurance non-refunds. They are expected to facilitate interpersonal exchange and strengthen further bilateral relations, including economic exchange, by reducing the burden on Japanese companies and citizens working overseas. The total number of countries that have concluded or signed such agreements with Japan now stands at 23, as of the end of 2019. In 2019, Japan signed agreements with Sweden and Finland and enacted agreements with Slovakia and China.

(2) Initiatives with International Organizations (WTO, OECD, etc.)

A World Trade Organization (WTO)
(A) Issues Confronting the WTO

The remarkable economic grow that Japan achieved with scarce natural resources after World War II is owed to the free trade system. The WTO has facilitated free trade through various efforts such as rule-making for trade liberalization, dispute settlement between WTO Members, and conducting monitoring to ensure the implementation of the WTO Agreements. But the WTO is now facing considerable challenges.

Hampered by dysfunctional rule-making mechanisms due to the stall of the Doha Round,6 the WTO has been unable to adequately address structural changes in the international economy, including the rise of emerging nations and the digitalization of the economy.

As explained below, criticism became heightened over the Appellate Body being blamed for overstepping its expected role by making overreaching judgments. In December 2019, following a disagreement among WTO Members to elect successors for outgoing members, the Appellate Body ceased to function.

Moreover, to monitor that the WTO agreements are observed, the WTO's system requires countries to notify about their trade-related measures. In reality, however, notifications concerning mainly policy to protect domestic industries, including subsidies, are often not being made, and WTO obligations are sometimes not complied with as needed.

  • 6 “Rounds” are trade liberalization negotiations in which all WTO Members participate. There were eight rounds of negotiations held during the GATT (General Agreement on Tariffs and Trade) years, from the first negotiations held in Geneva in 1947 to the last round held in Uruguay in 1994, and with each round held in response to the global economic demands of the time. The Uruguay Round saw decisions made to implement rules for new fields at the time, including trade in services and intellectual property, and strengthen mechanisms that included establishing the international organization that is the WTO. Later, the Doha Round became the first round to be held under the WTO system.
(B) Increasing Momentum and the Push for WTO Reform

In light of the above-mentioned circumstances, the need for WTO reform is becoming broadly acknowledged at numerous multinational fora while momentum builds toward implementing such reform.

In particular, G20 meetings chaired by Japan have significantly pushed the discussion forward concerning WTO reform (see the Special Feature on page 280). At the G20 Ibaraki-Tsukuba Ministerial Meeting on Trade and Digital Economy in June, despite a difference of opinions among participants, a ministerial statement that encapsulated an agreement on necessary WTO reform leading to the summit was released as G20. In the same vein, the G20 Osaka Summit affirmed a commitment to the basic principles of free trade ─ free, fair, non-discriminatory, and open markets, as well as fair competition ─ even amid growing tensions over trade issues. After it agreed to promote WTO reforms, such as the development of a dispute settlement system and rule-making including on electronic commerce, the G20 Osaka Summit gave political support to WTO reform by “reaffirming our support for the necessary reform of the World Trade Organization.” Furthermore, at the G7 Biarritz Summit held after the G20 Osaka Summit, leaders expressed their desire to “change the WTO.” In response to this international momentum, moves for WTO reform are accelerating in the following three areas: (1) reform of the dispute settlement system, (2) rule-making appropriate for the current global economy, and (3) strengthening monitoring functions for agreement compliance.

(C) Reform of the Dispute Settlement System

In the aftermath of the accident at TEPCO's Fukushima Daiichi Nuclear Power Station in March 2011, the ROK imposed a series of import restrictions on foods and other products from Japan. Despite Japan's explanation on the safety of Japanese food products based on scientific evidence, the ROK made no indication of relaxing or removing its restrictions. In response, Japan initiated the WTO dispute settlement procedures on the grounds that the said measures were trade-restrictive in violation of the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement).

While Japan held consultations with the ROK in accordance with the procedures, no mutually agreed solution was reached. Japan then turned to a WTO panel for a first instance adjudication in September 2015. In February 2018, after considering the opinions of five experts, including the committee members of international organizations, the panel ruled that the measures by the ROK were unnecessarily restrictive, arbitrary and unjustifiably discriminatory, which constituted violations of the WTO Agreement, and published a report recommending the ROK take corrective action. Dissatisfied with the panel's ruling, the ROK appealed to the Appellate Body for a second instance adjudication in April 2018.

In April 2019, the Appellate Body reversed the panel's ruling on the grounds that the panel's legal analysis was insufficient. It then offered no ruling on the WTO-consistency or inconsistency of the ROK's restrictive measures.

The Appellate Body report was not only extremely regrettable and putting a damper on recovery efforts for disaster-stricken areas in Japan, but failed to deliver a judgement whether the ROK's disputed measures were WTO consistent or not. For its failure to fulfill its function of settling disputes, the report significantly undermined the confidence in the WTO dispute settlement system itself. With this concern in mind, Japan has been proactively participating in discussions on the dispute settlement system reform.

The panel's factual findings on this case that Cesium concentrations in Japanese food products fall below the levels that the ROK itself set in accordance with international standards have been accepted without contestation. Japan is now explaining the panel's findings to countries and regions with import restrictions still in place, while taking every opportunity to encourage the relaxation or removal of such restrictions (see the Column on page 287).

(D) Rulemaking Appropriate for the Current Global Economy

The situation above makes it clear that accommodating the digitalization of and structural changes in the international economy will require more than just the existing rules of the WTO Agreements. At the 11th Ministerial Conference (MC11), in December 2017, Japan issued a joint statement concerning e-commerce with 71 WTO Members, including the U.S., the EU, and many developing country Members, and in January 2019 issued a joint statement together with WTO Members that affirmed their intention to begin negotiations.

With respect to negotiations participated in by all WTO Members, as a means to achieve the Sustainable Development Goals (SDGs), progress is being made with negotiations on fishery subsidy aimed at regulating subsidies that adversely impact fishing resources. Japan is also actively participating in these negotiations.

The WTO allows Members to self-declare as to whether or not they are a developing country, and even economically-advanced countries may be exempted from the WTO Agreements obligations by declaring themselves to be a “developing country” (Special and Differential Treatment (S&DT)).7 Japan and other developed countries see it as a problem that exemptions are granted to the “developing countries” that make up two thirds of the WTO's membership. The situation is gradually changing in 2019, as exemplified by the fact that Brazil, Singapore, and the ROK are renouncing the S&DT in current and future negotiations.

  • 7 S&DT: Special and Differential Treatment
(E) Strengthening of Monitoring Functions

The WTO's system is based upon transparency and predictability with regard to Members' trade policies, and requires that Members notify their trade-related measures. In reality, however, notifications mainly concerning policy to protect domestic industries, including subsidies, are often not being made, and sometimes WTO obligations are not complied with as needed.

Japan is actively leading discussions in this regard, which includes coordinating with the U.S. and the EU, among other parties, to submit a notification reform proposal aimed at strengthening the monitoring function of the WTO Agreements. By thoroughly explaining the purport and goal of the proposal together with the U.S. and the EU, Japan aims to gather support from WTO Members and achieve reform as early as possible.

(F) International Economic Dispute Cases

The WTO dispute settlement system is for resolving disputes among WTO Members under the covered agreements according to the dispute settlement procedures. It serves as a pillar that imparts stability and predictability to the WTO system. In addition to “Korea ─ Import Bans, and Testing and Certification Requirements for Radionuclides” (DS495),8 Japan has most recently been directly involved in the following cases (as of December 2019):

-Korea – Anti-Dumping Duties on Pneumatic Valves from Japan (DS504): A panel was established in June 2016. In April 2018, the panel found the ROK's measures to be in violation of the WTO Agreements. In September 2019, the Appellate Body issued a report reaching the same conclusion, which led to the DSB recommendation vis-a-vis the ROK to take corrective action.

-India – Certain Measures on Imports of Iron and Steel Products (DS518): A panel was established in April 2017. Appellate Body procedures have been suspended due to the cessation of Appellate Body function since December 2019.

-Korea – Sunset Review of Anti-Dumping Duties on Stainless Steel Bars (DS553): A panel was established in October 2018. Panel procedures are currently ongoing.

-Korea – Measures Affecting Trade in Commercial Vessels (DS571): Japan requested bilateral consultations with the ROK in November 2018. The consultations were held in December, 2018.

-India – Tariff Treatment on Certain Goods (DS584): In May 2019, Japan requested bilateral consultations concerning whether the tariff increase measures by India for information and communications technology products were consistent with the WTO Agreements.

-Japan – Measures Related to the Exportation of Products and Technology to Korea (DS590): In July 2019, Japan announced on the application of its export control measures on three semiconductor materials (Fluorinated polyimides, Resist, and Hydrogen fluoride) to the ROK and implemented individual export licensing requirements for such materials. In September, claiming that Japan's measures violated the WTO Agreements, the ROK requested bilateral consultations and the two countries conducted two rounds of such consultations. In November, the ROK announced that it would suspend the WTO dispute settlement procedures while the Export Control Policy Dialogues were pursued on a normal course of action between the relevant authorities. In December, the Seventh Japan-Korea Export Control Policy Dialogue was held for the first time in three and a half years.

  • 8 “DS xxx (numbers)” is the serial number since the launch of the WTO's dispute settlement system in 1995 assigned to each and every dispute at the time a request for consultations is received by the WTO Secretariat.
B Organization for Economic Co-operation and Development (OECD)
(A) Features

The OECD is the “world's largest think tank,” covering a wide range of economic and social fields such as macro economy, trade and investment, agriculture, industry, the environment, and science and technology. It makes policy recommendations and forms international norms, including through discussions at relevant committees. Japan acceded to the OECD in 1964 as the first country to do so outside of the U.S. and Europe. Since then, Japan has been actively engaged in OECD initiatives through discussions at relevant committees as well as through contributions in terms of financial and human resources.

(B) Visit by OECD Secretary-General Gurria to Japan

During his visit to Japan in April 2019, Secretary-General Gurria held meetings with Prime Minister Abe, Foreign Minister Kono, and other high-level officials. They reaffirmed the importance of maintaining and strengthening the multilateral trading system as well as the importance of establishing fair competition conditions. They also reaffirmed the importance of strengthening outreach in anticipation of Southeast Asian countries' future membership in the OECD, while affirming cooperation toward the G20 Osaka Summit, which is chaired by Japan. The talks also saw the announcement of the OECD Economic Survey of Japan, which praised Japan for its Abenomics strategy and set forth policy proposals for improving productivity, among other matters.

(C) 2019 OECD Ministerial Council Meeting

Chaired by Slovakia and co-chaired by Canada and the ROK, the OECD Ministerial Council Meeting was held in May under the theme of “harnessing digital transition for sustainable development.” At the meeting, Japan expressed its views and points concerning such issues as the digital economy, including data flow; quality infrastructure investment; innovation-based efforts toward achievement of the SDGs; free and open trade; securing a level playing field; and the importance of WTO reform. It also emphasized the importance of Southeast Asian nations' future accession to the OECD. Japan's statements contributed to discussions in the OECD, many of which were incorporated into the outcome documents, and drove discussions toward the relevant G20 Ministerial Meetings and the G20 Osaka Summit that followed.

(D) Initiatives in Various Sectors

For the issue of steel excess capacity, following the G20 Hangzhou Summit, China in 2016, the Global Forum on Steel Excess Capacity (GFSEC) was established with the participation of China, which accounts for approximately half of the global production volume of crude steel. As the standing G20 Presidency and the Chair of the GFSEC since December 2018, Japan has demonstrated strong leadership toward and played an active role in solving the above-mentioned problems, including at the third GFSEC ministerial meeting in Tokyo in October 2019.

Meanwhile, the OECD is strengthening its cooperation with the G20 in the areas that include reviewing international taxation principles in response to economic digitalization, as well as the formulation of principles concerning quality infrastructure investment and corporate governance.

(E) Strengthening Relations with Asia

In light of the growing importance of Southeast Asia as a center for global economic growth, the OECD places importance on strengthening relations within the region. The 2019 Forum of the Southeast Asia Regional Programme was held in Paris in March. Parliamentary Vice-Minister for Foreign Affairs Yamada Kenji attended and delivered a speech on such matters as Japan's ongoing commitment toward the OECD Southeast Asia Regional Programme, which was established under the leadership of Japan in 2014, as well as Southeast Asia's connectivity and the role of the OECD. Going forward, it is important to effectively utilize the Southeast Asia Regional Programme in order to continue to support economic integration and domestic reform in the region with a view to the future accession to the OECD by ASEAN countries.

(F) Contributions in Terms of Financial and Human Resources

Japan was the second largest financial contributor to the OECD after the U.S. in 2019, covering 9.4% of the OECD's mandatory contributions (Part I Budget). Moreover, Japanese nationals have successively served as the Deputy Secretary General (currently Deputy Secretary General Kono Masamichi), the second-highest position at the OECD Secretariat. Japan was the largest contributor to the OECD Development Centre in 2019, and a Japanese national (Ms. Ueda Naoko) serves as a Deputy Director of the Centre. Thus, Japan supports the OECD through contributions in terms of financial and human resources.

(3) Initiatives in International Meetings (G7 and G20 Summits, APEC, etc.)

A G20 and G7

Japan actively participates in G20 and G7 Summits, which are attended by the world's major nations, and makes efforts to maintain and strengthen the international order.

(A) G20 Osaka Summit

At the G20 Osaka Summit held in June, discussions were held on subjects that include the G20's efforts to promote free trade, drive global economic growth through innovation, address disparity, and contribute to solving environmental issues and other global problems. With Japan as the Presidency, Prime Minister Abe actively led discussions, issued the G20 Osaka Leaders' Declaration, which covered a wide range of initiatives, and demonstrated the G20's strong commitment to the world.

G20 Osaka Summit (June 29, Osaka; Photo: Cabinet Public Relations Office)G20 Osaka Summit
(June 29, Osaka; Photo: Cabinet Public Relations Office)

(1) Leaders agreed on principles in support of the international free trade system amid global trade-related tensions, including free, fair, non-discriminatory, and open markets, as well as a level playing field. Leaders also reaffirmed their support for WTO reform, including reform of the dispute settlement system and establishing rules relevant to the times.

(2) Japan shared its Data Free Flow with Trust (DFFT) concept inspired by economic digitalization, and used the Summit as an opportunity to give political momentum to international rulemaking concerning digital economy particularly data flow and electronic commerce by launching the Osaka Track (see the Special Feature on page 280). Japan also formulated the G20 AI Principles based on a human-centered approach to AI. Japan also issued an individual statement about the exploitation of the Internet and social media by terrorists, and emphasized the importance of initiatives taken in cooperation with the digital industry.

(3) Leaders agreed to promote women's empowerment through women's participation in labor market, girls' and women's education and training, and improved women's access to business leaders and entrepreneurship. They also announced a policy for addressing disparities fueled by gender inequality.

(4) With an eye to achieving global inclusivity and sustainability, leaders approved the “G20 Principles for Quality Infrastructure Investment,” which include elements of international standards concerning things such as openness, transparency, economic efficiency, and debt sustainability. With respect to global health, leaders focused on (1) Universal Health Coverage (UHC) achievement, (2) population aging, and (3) health emergencies. They also agreed to strengthen measures aimed at the debt issue in developing countries, disaster prevention, education, and achieving the SDGs by utilizing science, technology, and innovation (STI).

(5) Regarding urgent issues concerning the global environment, leaders agreed on the importance of achieving a “virtuous cycle of environment and growth” through innovation. Additionally, concerning the problem of marine plastic litter that grows more serious every year, Japan shared details on the Osaka Blue Ocean Vision, which aims to reduce additional pollution by marine plastic litter to zero by 2050.

The “Osaka Track” and Promotion of WTO Reforms: Promoting International Rule-making on Digital Economy

Prime Minister Abe speaking at the “Leaders' Special Event on Digital Economy” on the sidelines of the G20 Osaka Summit (June 28, Osaka; Photo: Cabinet Public Relations Office)Prime Minister Abe speaking at the “Leaders' Special Event on Digital Economy” on the sidelines of the G20 Osaka Summit (June 28, Osaka; Photo: Cabinet Public Relations Office)

During the period of the G20 Osaka Summit, the words “Osaka Track” were featured in the headlines of many newspapers. You may recall seeing this photograph of Prime Minister Abe, U.S. President Trump, and Chinese President Xi Jinping sitting at a desk. This was the moment, in Osaka, when Prime Minister Abe declared the launch of the “Osaka Track,” which is the road toward promoting international rule-making on the digital economy.

We face the urgent task of establishing rules for data flow and electronic commerce, which are the engines of growth for the digital era. Based on this perspective, Prime Minister Abe advocated the launch of the “Osaka Track” at the World Economic Forum Annual Meeting in Davos in January, with the aim of advancing discussions on global data governance. Five months later, Prime Minister Abe took the opportunity of the G20 Osaka Summit in June to host the Leaders' Special Event on Digital Economy, during which he declared the launch of the “Osaka Track” as a process for promoting international rule-making on the digital economy, and in particular, data flow and electronic commerce.

The leaders of the 24 countries and regions participated in the launch of this initiative and affirmed the importance of maximizing the benefits that digitalization and emerging technologies bring, of promoting innovation and harnessing the full potential of the digital economy, and of promoting international policy discussions on the digital economy to that end.

With the boost provided by the “Osaka Track,” more than 80 like-minded countries are now advancing negotiations on electronic commerce in the WTO, with a view to establishing rules on the digital economy. The WTO, established in 1995, has fulfilled a major role in the world economy as an international organization responsible for establishing and enforcing rules related to goods and services trade. However, it is becoming increasingly clear that the existing rules set out in WTO agreements are inadequate for responding to the various challenges raised by Internet trading and the digital economy. Negotiations on electronic commerce in the WTO bring stability and predictability to trade in the ever-changing digital society. At the same time, it ushers in a new phase for the WTO, which has not succeeded in new rule-makings in recent years, and also represents one of the pillars of WTO reforms. Negotiations are now ongoing in Geneva, where the WTO is headquartered, with the aim of achieving substantial progress at the 12th WTO Ministerial Conference, and Japan is taking the lead in these negotiations as the co-convener. The progress achieved here is also expected to serve as an important guidepost along the path of the “Osaka Track.”

On the other hand, the “Osaka Track” is not limited to negotiations in the WTO. Diverse stakeholders, including international organizations that possess specialized knowledge in various fields and private-sector corporations that play an active role on the frontlines of the digital economy, collaborate to advance a wide range of discussions on the digital economy. While each country has its own national strategy on the digital economy and legal systems on data flow, the “Osaka Track” has an important purpose of establishing rules that overcome such differences in the standpoints of each country in order to realize “Data Free Flow with Trust” (DFFT).

Japan will continue to exert its leadership toward the realization of a world where all people can enjoy the fruits of digitalization fairly and equally.

(B) G20 Aichi-Nagoya Foreign Ministers' Meeting

At the G20 Aichi-Nagoya Foreign Ministers' Meeting, which was held in November and closing the year of Japanese G20 Presidency, discussions were held on the themes of (1) promotion of free trade and global governance, (2) SDGs, and (3) Africa's development. Representatives from local high schools also gave a presentation themed on educational disparity.

Chaired by Foreign Minister Motegi, this meeting affirmed leaders' achievements made at the G20 Osaka Summit and TICAD7 and served as a springboard for discussing concrete measures toward future action. During the closing session, Foreign Minister Motegi handed over the presidency mallet, a symbol of the G20 Presidency, to Saudi Arabia, which will become the G20's next Presidency.

G20 Aichi-Nagoya Foreign Ministers' Meeting (November 23, Nagoya)G20 Aichi-Nagoya Foreign Ministers' Meeting
(November 23, Nagoya)
(C) G7 Biarritz Summit (France)

At the G7 Biarritz Summit held in August, G7 leaders held candid discussions on the theme of “Fight Inequalities” with regard to major topics for the G7, namely the global economy, global trade, diplomacy, and security. On the topics of Africa, the environment, and digitalization, views were exchanged from a diversity of viewpoints, with participation by invited outreach countries, international organizations, and civil society. With the goal of the G7 nations banding together on its foundation of shared values to play a leading role in the international community, Prime Minister Abe led candid discussions among G7 leaders on the back of achievements at the G20 Osaka Summit.

G7 Biarritz Summit (August 25, Biarritz, France; Photo: Cabinet Public Relations Office)G7 Biarritz Summit (August 25, Biarritz, France; Photo: Cabinet Public Relations Office)

(1) With respect to discussions on diplomacy and security, Prime Minister Abe led discussions on North Korea as one of the foremost priorities for the G7. G7 leaders agreed on the importance of achieving the complete, verifiable, and irreversible dismantlement (CVID) of all of weapons of mass destruction and ballistic missiles of all ranges, and confirmed the international community's commitment to fully implementing the relevant UN Security Council resolutions while continuing to support the process between the U.S. and North Korea. Moreover, support was expressed to Prime Minister Abe's call for understanding and cooperation toward an immediate resolution of the abductions issue Discussions were also held on Iran, Syria, and other aspects of the Middle East situation, as well as recent conditions in China, including the situation in Hong Kong.

(2) With respect to global economy and trade, Prime Minister Abe called for leaders to instruct their ministers to provide support for rule-making at the WTO under the Osaka Track established at the G20 Osaka Summit, and to ensure that substantial progress will be made before the WTO's 12th Ministerial Conference is held.

(3) Regarding Africa, leaders agreed on matters including the importance of improving transparency in public procurement with a regard for the G20 Principles for Quality Infrastructure Investment. They also expressed their expectations for TICAD7, which was held immediately after the Summit. On the environment, leaders welcomed the Osaka Blue Ocean Vision concerning measures to combat marine plastic litter, while also affirming the Metz Charter on Biodiversity at the summit level.

B Asia-Pacific Economic Cooperation (APEC)

APEC is a framework of economic cooperation in which 21 economies (countries and regions)9 in the Asia-Pacific region participate. The Asia-Pacific region is the “world's growth center,” accounting for about 40% of the world's population, about 50% of trade volume, and about 60% of GDP. APEC, in order to liberalize and facilitate trade and investment in the region, conducts activities such as promoting regional economic integration, and enhancing economic and technical cooperation. The Asia-Pacific region, which thrives by liberalizing trade and investment and strengthening connectivity in accordance with international rules, is the core of the “Free and Open Indo-Pacific” that Japan has been promoting. Japan's contributions to APEC's development are of great significance to Japan's own economic growth and development and to the overseas expansion of Japanese companies.

At APEC Chile 2019, discussions were held under the overall theme of “Connecting People, Building the Future” at various meetings throughout the year in line with four priority areas: (1) Digital Society, (2) Integration 4.0,10 (3) Women, SMEs and Inclusive Growth, and (4) Sustainable Growth. Japan, which chaired the G20 in 2019, shared in APEC the G20's outcomes related to the digital economy, marine plastic litter, and women's empowerment, and achieved synergy through cooperation with Chile, the APEC Chair. At forums such as the APEC Ministers Responsible for Trade Meeting held in May, as a standard-bearer of free trade, Japan expressed its commitment to continuing efforts aimed at achieving growth and development throughout the Asia-Pacific region, which is the core of the Free and Open Indo-Pacific. The APEC Ministers Responsible for Trade Meeting discussed such subjects as driving APEC support for the WTO, promoting regional economic integration, and advancing comprehensive and sustainable growth in the digital age, and gained a positive outcome, the Ministers Responsible for Trade Meeting Joint Statement, which was adopted for the first time in four years. The 2019 APEC Economic Leaders' Meeting was canceled due to domestic instability in Chile as stated in an announcement on October 30 by Chile's President Piñera. Meanwhile, despite being scheduled to be held immediately prior to the Leaders' Meeting, the Concluding Senior Officials' Meeting was held on December 7 at the APEC Secretariat in Singapore. In the meeting, three roadmaps related to women and inclusive growth, illegal, unreported, and unregulated (IUU) fishing, and marine debris were endorsed as the main outcome documents. Chile also released the APEC Chile 2019 Host Economy Leader's (read: President of Chile's) Statement.

Malaysia will host APEC in 2020.

  • 9 Countries and regions are referred to as “economies” in APEC terminology.
  • 10 Discussions were held concerning initiatives that include using technologies arising from Industry 4.0 to promote global value chains (GVCs), with a focus on strengthening connectivity and achieving regional economic integration.

(4) Intellectual Property Protection

Strengthening intellectual property protections is extremely important to promoting technological innovation and, ultimately, economic development. Japan has actively participated in multilateral consultations such as APEC, the WTO (TRIPS),11 and the World Intellectual Property Organization (WIPO), and is working to develop an environment for ensuring that Japanese intellectual property is appropriately protected and utilized overseas. During bilateral talks, as well, Japan calls on other countries to proactively strengthen intellectual property protections. With respect to China, at the first Japan-China Innovation and Cooperation Dialogue and Japan-China Economic Partnership Consultation, held in April 2019, Japan called on China to prohibit forced technology transfers, protect trade secrets, and stamp out counterfeit and pirated goods. For EPAs as well, Japan strives to establish regulations on intellectual property rights to ensure the adequate and effective protection of intellectual property. The Japan-EU EPA, which entered into force on February 1, 2019, and the TPP11, which entered into force on December 30, 2018, both incorporated contents on further promotion of the protection and use of intellectual property. Moreover, for the purpose of rapidly and efficiently providing assistance for Japanese companies that have suffered from counterfeit and pirated goods, MOFA appoints Intellectual Property Officers at almost all of Japan's diplomatic missions overseas so that they can advise Japanese companies and make inquiries with or requests to their counterpart governments. Japan is also engaged in efforts to improve the capacity of government employees in developing countries to counter the spread of counterfeit and pirated goods, and to strengthen the protection of intellectual property, such as by dispatching experts through the Japan International Cooperation Agency (JICA).

  • 11 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)