TRADE POLICY REVIEW OF JAPAN
November 6, 2002
Statement by the United States
Delivered by Nancy Adams
U.S. Trade Representative's Office

Thank you, Mr. Chairman. On behalf of the United States, I welcome this opportunity to participate in Japan's sixth Trade Policy Review and appreciate the report by the Secretariat, which provided us a comprehensive review of recent developments in Japan's trade policy. We appreciate the Government of Japan's openness and transparency in this review, as well as the time and effort the GOJ demonstrated in preparing its submission for the Secretariat. We would also like to thank the discussant for his thought provoking and insightful comments and questions.

We have provided detailed questions and comments on the report for Japan to consider, and we look forward to receiving responses from its delegation, which will further enhance our understanding of Japan's trade policy.

As the world's second largest economy and a major beneficiary of an open global trading system, Japan, like the United States, has a large stake in furthering liberalization of world trade.

Mr. Chairman, I should note that currently Japan is the United States' 3rd largest goods trading partner with $184.2 billion in total two-way goods trade during 2001. Trade in services with Japan B imports and exports B accounted for 24% of the level of our goods trade with Japan.

Since its last review in November 2000, Japan has been undertaking some significant structural and regulatory reforms that are a prerequisite for its return to sustainable growth. We welcome Prime Minister Koizumi's determination to revitalize the Japanese economy and encourage his administration to continue to boldly embrace reform.

As the Secretariat's report makes clear, Japan still has work to do in order to clear away regulations that continue to impede economic growth in key sectors such as information technologies, telecommunications, and energy.

The report highlights the fact that regulatory reform in Japan's agriculture sector has remained generally unchanged since the last trade policy review. Tariffs are high, and Government support to this sector continues to surpass its contribution to the economy as a percentage of GDP, insulating the sector from foreign competition. With respect to the Doha Development Agenda, the United States calls on Japan and others to join us in reducing tariffs on agricultural imports and trade-distorting subsidies to domestic farmers, so we can achieve success in the current WTO round of trade talks.

It is worth mentioning that we are concerned with Japan's use of non-science-based import restrictive measures, affecting the importation of a broad range of agricultural products. As a vital trading partner, we expect Japan to fulfill its obligations under the WTO SPS Agreement and employ only the least trade-restrictive sanitary and phytosanitary measures.

We are also concerned with indications that Japan may impose emergency tariff measures on beef imports. Such measures would be inappropriate if taken in response to a recovery in the beef market following last year's BSE crisis in Japan and not due to an import surge above historic levels.

The report notes progress by the GOJ to improve transparency and competition in government procurement, which has led to an increase in procurement from foreign suppliers. We applaud Japan's efforts but note that problem areas remain B such as bid-rigging in the construction sector. As a signatory to the WTO Government Procurement Agreement, we urge Japan to continue to implement measures that enhance competition, which will benefit foreign supplies and relieve Japan's strapped fiscal system.

The report notes the increasing importance of the services sector to Japan's GDP, as well as the ongoing reforms in financial services and telecommunications. The United States welcomes the efforts of the Koizumi Administration in these areas. With regard to the financial sector, we commend Japan on the steps taken in 2001 that ease the process by which foreign banks can establish a commercial presence and operate in Japan. We welcome Japan's continuing commitment to seriously address problems in its banking sector.

In the area of regulatory transparency we are very concerned with the GOJ's unwillingness to date to agree to a transparent decision-making process on a major funding decision for the Life Insurance Policyholder Protection Corporation. Given the magnitude of this decision we consider it essential that interested parties be given meaningful opportunity to participate in this process.

In the telecommunications sector, Japan has implemented further regulatory reform with a view to increasing competition. While we welcome this effort, the Japanese telecommunications market remains dominated by one major carrier group. We are concerned, moreover, that Japan may actually raise its interconnection rates, despite the global trend of reducing such rates. We urge Japan to continue to take steps in this important sector that will spur growth and benefit consumers.

The report notes Japan's increasing interest in the negotiation of free trade agreements for deeper bilateral and regional integration. The Japan-Singapore Economic Agreement for a New Age Partnership is an example of this new policy direction for Japan. It is the view of the United States that FTAs B those which seek to liberalize substantially all trade B are an important step toward global liberalization of trade. FTAs should promote trade, not divert it. We trust that Japan shares these views.

In closing, we are heartened by the progress that has been achieved since Japan's last trade policy review. Japan clearly recognizes the benefits that can be gained through further liberalization and structural reform. Good policy decisions made in areas such as financial services and corporate governance are testament to this.