Trade policy review report by the secretariat

3.2  Trade Policy Objectives

1.1.  Under the third arrow of Abenomics, on structural reform, there have been several significant developments in Japan's economic policy, including global economic integration which includes trade policy. The diminishing surplus on the current account and persistent trade deficits have increased emphasis on improving competitiveness through a favourable business environment, both within and outside Japan. Therefore, the focus of Japan's trade policy under Abenomics includes:

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  extending its network of economic partnership agreements (see below);
  
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  strategic approaches to emerging economies to support expansion by Japanese enterprises, export infrastructure and systems, and to secure supplies of resources; and
  
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  promoting foreign direct investment into Japan (see below).²⁸
  

3.3  Trade Agreements and Arrangements

3.3.1  WTO

1.1.  Japan grants MFN or preferential treatment to a country or territory that meets one or more of the following criteria: it is a Member of the WTO; it is covered by a provision of the Cabinet Order under Article 5 of the Customs Tariff Law; or with whom Japan has a bilateral treaty of commerce and navigation. At present that includes all countries and territories except Andorra, Equatorial Guinea, the State of Eritrea, Lebanon, the Democratic People's Republic of Korea, South Sudan, and the Democratic Republic of Timor-Leste.

1.2.  According to the authorities, maintaining and strengthening the multilateral trading system under the WTO has been a main pillar of Japan's external economic policy. As one of the major Members of the WTO, Japan is committed to supporting the system. At the same time, Japan is also promoting bilateral and regional negotiations on economic partnership agreements as a means of complementing the multilateral trading system.

1.3.  Japan actively participates in the WTO in both regular work and in negotiations. In recent years it has focused on the Trade Facilitation Agreement and is a party to the plurilateral negotiations on expanding the Information Technology Agreement, trade in services, and Environmental Goods Agreement.

1.4.  In dispute settlement, Japan has been a complainant in 19 cases, a respondent in 15, and a third party in 146 cases (Table A2.1). Japan has submitted numerous notifications under the different WTO agreements (Table A2.2).

3.3.2  Regional and preferential agreements

1.1.  Current policy for negotiating Economic Partnership Agreements (EPAs) is based on the Japan Revitalization Strategy, decided by Cabinet in 2013 and, before that, the Basic Policy on Comprehensive Economic Partnerships of 2010. Under the Strategy, "the government will raise FTA ratio from current 19% to 70% by 2018, by promoting economic partnership as a basis of global economic activities". The FTA ratio is defined as the percentage of the volume of trade to which FTAs (signed or in force) are applied in total trade volume of Japan. The Strategy confirms that work on several EPAs will proceed concurrently (including the Trans-Pacific Partnership (TPP), the Regional Comprehensive Economic Partnership (RCEP), the Japan-China-Republic of Korea FTA, and the Japan-EU EPA).

1.2.  As at November 2014, the network of 13 regional trade agreements or EPAs in force is the same as that reported in the last Trade Policy Review.²⁹ Under these agreements, Japan has tended to exclude a variety of agricultural and related products – particularly certain tariff lines for meat and meat products, fish and fish products, dairy products, rice, products of the milling industry, plywood, leather and products thereof, and footwear.

1.3.  During the period under review, the Japan-Australia EPA (JAEPA) was signed (July 2014) and agreement in principle was reached on the Japan-Mongolia EPA in the same month.

1.4.  In 2013 Japan began negotiations with China and the Republic of Korea on a China-Japan-Republic of Korea free trade agreement in March, with the European Union in April, started negotiations on the Regional Comprehensive Economic Partnership in May, entered the negotiations on the Trans-Pacific Partnership in July, and Japan and Turkey held a scoping meeting on a possible EPA in June. EPA/FTAs with Canada, Colombia, the Gulf Cooperation Council, and the Republic of Korea are under negotiation (Table 2.2).

Table 2.5 Trade agreements concluded by, not yet in force and under negotiation

Title	Launched	Status	Note
Australia	April 2007	Signed, July 2014
Mongolia	June 2012	Agreement in principle, July 2014
China-Japan-Republic of Korea	March 2013	Under negotiation
Regional Comprehensive Economic Partnership	May 2013	Under negotiation	ASEAN (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Viet Nam), Australia, China, India, Japan, Republic of Korea, and New Zealand
Trans-Pacific Partnership	July 2013 (Japan joined)	Under negotiation	Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Viet Nam
European Union	April 2013	Under negotiation
Canada	November 2012	Under negotiation
Colombia	December 2012	Under negotiation
Gulf Cooperation Council	September 2006	Under negotiation	Kingdom of Bahrain, State of Kuwait, Oman, Qatar, Kingdom of Saudi Arabia, United Arab Emirates
Republic of Korea	December 2003	Under negotiation

Source: Various.

3.3.3  Other agreements and arrangements

1.1.  Japan provides preferential access under the Generalized System of Preferences to 144 countries or territories. Since the last review of Japan, Samoa was taken off the list in April 2014 because it was no longer classified as a least-developed country, and Croatia graduated from the list because it had been classified as a high-income economy in the previous three years' World Bank statistics.

1.2.  Under the GSP scheme, preferential tariff rates apply to 409 tariff lines out of 2,320 (at the 9-digit level) in Chapters 1 to 24 (agriculture and fisheries) and 3,153 out of 7,029 in Chapters 25 to 97.³⁰ The preferential margin varies from one product to another and the main exclusions are rice and rice products, meat and meat products, fish, dairy products, pineapples, cereal products, textiles and clothing, leather and leather products, and footwear.

1.3.  Forty-seven of the countries and territories that receive GSP treatment are least-developed countries and qualify for more extensive product coverage under Japan's duty-free and quota-free treatment for LDCs. Currently, about 98% of tariff lines are covered.

1.4.  Product coverage under the duty-free quota-free scheme for least developed countries and the GSP scheme is reviewed each year as part of the annual tariff revision. The GSP scheme itself is revised every ten years with the next revision due in 2021.

1.5.  Japan has been a Member of APEC since its foundation in 1989 and a member of the Asia-Europe Meeting (ASEM).