“2014 Report on Compliance by Major Trading Partners with Trade Agreements –WTO, EPA/FTA, and IIA-”

and “METI Priorities Based on the 2014 Report”

May, 2014

Trade Policy Bureau

Ministry of Economy, Trade and Industry

○ Select priority issues from among measures analyzed in the report. ○ Publish government actions taken for priority issues and their achievements.

○ Experts (“Subcommittee on Unfair Trade Policies and Measures” under the Industrial Structure Council, chaired by Mr. Kazunori Ishiguro, Professor of Graduate Schools for Law and Politics,

the University of Tokyo) analyzed problems with trade policies and measures of major trading partners based on international rules, including WTO agreements. ○ The report has been published every year since 1992. The 2014 report is the 23rd edition. ○ The United States and the EU also publish the same kind of report every year.

Report on Compliance by Major Trading Partners with Trade Agreements

International Economic Dispute Resolution Using the Report on Compliance by Major Trading Partners with Trade Agreements

Industries

Present strategies Report results

Foreign governments

Point out inconsistencies

with the international

rules

Avoid unnecessary trade friction

Promote collaboration between govt. and private sector ・ Investigate consistency with

international rules ・Develop strategies ・ Request the abolishment of

measures through bilateral consultations

・Raise the issues in multilateral forums

・ Utilize dispute settlement mechanisms including WTO

Action taken from METI Priorities

METI Priorities

Provide information Request assistance

1

2014 Report on Compliance by Major Trading Partners with Trade Agreements

1. Points out the actual or potential inconsistencies with international rules of 123 policies/measures of 16countries and territories. 8 policies/measures are newly listed (In the 2013 report: 10 policies/measures).

2. Due to trade imbalance caused by the stagnation of the world economy and the excess supply problem, the number of cases where investigations were initiated for trade restrictions or the imposition of trade remedy measures has been increasing in recent years. 3. The following chapters are newly published in Part II (WTO Rules and Major Cases). Chapter 4 : General and Security Exceptions Chapter 18 : Monitoring of Trade Policies and Measures

4. As features of 2014, the following columns are newly published. Global Distribution of Counterfeit Goods and Problems in Legal Systems and Their Operation Resources/Energy and the WTO Rules

Report

2

China – Violation of Tariff Concessions on Photographic Film in Rolls

Indonesia – Local Content Requirement in the Retail Sector

Indonesia -Non-fulfilment of certain Intellectual Property related obligations under Japan-Indonesia EPA

EU - The Biocidal Products Regulation (BPR)

Republic of Korea - Act on Registration and Evaluation of Chemical Substances

Russian Federation - Violation of Tariff Concessions on Refrigerator and other products

India - Food Security Act

Ukraine – Recycling Fee on motor vehicles

These two issues have been implemented.

1. Issues to be resolved through bilateral/multilateral consultations with possible use of the WTO Dispute Settlement Mechanism Indonesia: Elimination of Export Restrictions on Mineral Resources Russia: Correction of Discriminatory System/Implementation of Transport Vehicle Recycling Fee Brazil: Correction of Discriminatory System/Implementation

of Automobile Industrial Product Tax Ukraine: Revocation of Safeguard Measures against

Automobiles

2. Issues Already Referred to the WTO Dispute Settlement Mechanism China: Elimination of Export Restrictions on Raw Materials Elimination of AD Duty Measures on High-Performance

Stainless Steel Seamless Tubes Originated in Japan Canada: Abolition of Local Content Requirements in the

Ontario’s Feed-in Tariff Program for Renewable Energy Argentine: Elimination of Import Restrictions on a Wide Range of Items 3. Issues on which Japan urges prompt implementation of the WTO recommendations

United States: Confirming Abolition of Zeroing EU: Elimination of Import Duties Imposed on IT Products

Specified as Non-Dutiable by the WTO Information Technology Agreement

METI Priorities (Progress of Main Issues)

1. Issues to be resolved through bilateral/multilateral consultations with possible use of the WTO Dispute Settlement Mechanism Indonesia: ･Elimination of Export Restrictions on Mineral Resources ･Ensuring the Enforcement of the New Trade Act, the New

Industries Act and Other Related Regulations in Conformity with the WTO Agreements (NEW)

Russia: Violation of Tariff Concessions mainly caused by mixed duties (combination of ad valorem duty and specific duty) (NEW)

Brazil: Correction of Discriminatory System/Implementation of Industrial Product Tax

2. Issues Already Referred to the WTO Dispute Settlement Mechanism China: ･ Elimination of Export Restrictions on Raw Materials ･ Elimination of AD Duty Measures on High-Performance

Stainless Steel Seamless Tubes Originated in Japan Argentine: Elimination of Import Restrictions on a Wide

Range of Items Ukraine: Revocation of Safeguard Measures against

Automobiles

3. Issues on which Japan urges prompt implementation of the WTO recommendations United States: Confirming Abolition of Zeroing Canada: Abolition of Local Content Requirements in the

Ontario’s Feed-in Tariff Program for Renewable Energy

2014 Priorities 2013 Priorities

3

In December 2008, the Indonesian Diet passed the amendment to the old Mining Law to establish a New Mining Law. The New Mining Law was promulgated after the President’s signature in January 2009.

1) Requirements for adding high value, as well as domestic concentration and refinement With respect to certain minerals, including nickel and copper, the requirements for domestic concentration and refinement were introduced. In

January 2014, a ban on unprocessed ore export was imposed. 2) Export duties and export licensing system A ban on export of copper concentrate and slime (byproduct) was extended up until January 2017 and during that period Indonesia adopts an

export licensing system (which requires to fulfill a commitment to build a refinery, etc.) and imposes export duties on copper concentrate (to be gradually increased up to 60%).

3) Domestic Sales Requirement Producers are required to allocate a certain minimum percentage of their total production and sales to the domestic market.

Summary of measures

In December 2009, Japan expressed concerns at the Investment Subcommittee established pursuant to the Japan-Indonesia EPA. Japan raised the concerns, jointly with the United States and the EU, at the meeting of the WTO Committee on Trade-Related Investment

Measures(TRIMs) held in October 2011. (Japan continued expressing concerns at the above Committee in May and October 2012 and April and October 2013 and at the Council for Trade in Goods in June 2012.)

From June to November 2011, the Minister of Economy, Trade and Industry expressed concerns to the Indonesian Vice-President, Economic Coordination Minister, Energy and Mineral Resources Minister, Industry Minister, and Trade Minister, respectively.

At the Japan-Indonesia summit meeting in June 2012 and December 2013, the Prime Minister raised concerns to the Indonesian President and requested reconsideration.

At the Japan-Indonesia Dialogue on Material & Mineral Resources Industries in August 2012 and the Indonesia-Japan Joint Economic Forum in October 2013, the Japanese Government and Industry requested improvement of measures and flexible implementation again.

In January 2014, the Minister of Economy, Trade and Industry expressed concerns to the Indonesian Trade Minister on the occasion of the Davos Forum.

Background

Japan continues requesting improvement through opportunities such as bilateral consultations and the framework of the WTO. Current status

Indonesia: Export Restrictions on Mineral Resources Priorities

4

○ The Act was approved by the Diet in December 2013. It provides for national industrial policies and measures for the development of industrial resources and the promotion of industry etc., with the aim of facilitating efficient use of resources and strengthening the national industrial structure.

○ The Act contains various provisions for which conformity with the WTO Agreements is questioned. ・A ban or restrictions on export of natural resources and measures to ensure domestic supply: Same as the New Mining Act ・Obligation to use domestic products (so-called local content requirements) ・Others: Criteria for workers’ competency, prohibition of the employment of foreign workers in specific industries, obligation to transfer technology upon certain technology procurement, preferential measures for domestically developed technologies, obligation to comply with the Indonesian national standards, nationality restrictions for small industry owners, and implementation of industrial safety measures with the aim of enhancing the security of national industry (including non-tariff means)

Summary of the New Industries Act

○ The Act was approved by the Diet in February 2014. It comprehensively provides for various trade regulations and strengthens the government’s authority on trade. ○ The Act contains various provisions for which conformity with the WTO Agreements is questioned. Some provisions overlap with those in the New Industries Act. ・Local content requirements ・General import/export licensing system and a ban or restrictions on import and export (not limited to natural resources) ・Others: Labeling regulations, control of the amounts and prices of certain goods, obligation to comply with the Indonesian national standards, criteria for workers’ competency, and review of international trade agreements, etc.

Summary of the New Trade Act

Both the New Trade Act and the New Industries Act leave the details of their provisions to implementing regulations. Therefore, Japan will keep an eye on the establishment of implementing regulations, pay attention to existing relating measures, and continue requesting Indonesia to ensure conformity with the WTO Agreements through bilateral consultations and at WTO Committees.

Current Status

Indonesia: New Trade Act and New Industries Act Priorities

5

○ Local content requirements for franchisers and franchisees (Regulation of the Minister of Trade No. 53 of 2012 (promulgated in August 2012)) ・Require them to use domestic goods and services for 80% or more of their use of raw materials and business facilities and their sale of goods ○ Local content requirements for shopping centers, etc. (Regulation of the Minister of Trade No. 70 of 2013 (promulgated in December 2013 and

enforced in June 2014)) ・Require them to ensure that 80% or more of their line of goods are domestic goods in quantity and type ○ Others: Labeling regulations, a ban on import of second-hand goods, a ban on export of mining resources under the new Mining Act, etc.

Existing Measures Inconsistent with the WTO Agreements that may Relate to Both Acts

Russia: Violation of Tariff Concessions mainly caused by mixed duties (combination of ad valorem duty and specific duty)

Priorities

6

● Russia acceded to the WTO in August 2012 and internationally committed to tariff concessions(bound rates). ● Russia’s applied rates for some items (around 200 items, including cheese, pulp, and secondhand cars) exceed bound rates and

some Japanese companies have overpaid duties for specific items. ● Such measures being taken by Russia may be in violation of Article II of the GATT (schedules of tariff concessions)

(e.g.) Large refrigerators with capacity exceeding 340 liters ○ WTO bound rates and applied rates of Russia ○ Russia’s applied rate was prescribed as 20%, but not less than 0.24 euro per 1 liter. Therefore, the applied rate exceeds the WTO

bound rate when 0.24 euro multiplied by the capacity of the refrigerator exceeds 20% of the value of the item, and importers (Japanese local companies) have suffered significant overpayments.

○ Although Russia reduced the applied rate in October 2013, overpayments are still occurring. ○ Russia imposes tariffs exceeding the bound rates, which may possibly constitute a violation of the WTO tariff concession.

Summary of Measures

Aug. 2012 - Sep. 2013 - Sep. 2014 - Sep. 2015 - Sep. 2016 –

Bound rates 20% 18.3% 16.7% 15% 13.6%

Applied rates 20% , but not less than 0.24 euro per 1 liter

18.3% , but not less than 0.16 euro per 1 liter(*) (*) Enforced on October 19, 2013, onward

Japan continues requesting Russia for improvements through various channels such as WTO Committees and bilateral consultations.

Background

Current Status

○ The Government of Japan raised this issue against Russian Deputy Minister of Economic Development at Japan-Russia intergovernmental meetings.

○ On August 21, 2013, Minister of Economy, Trade and Industry of Japan requested Russian Minister of Economic Development for immediate correction.

○ In addition to those bilateral consultations, since March 2013, Japan has raised this issue on multilateral occasions, such as WTO Council on Trade in Goods.

Brazil: Discriminatory Implementation of Industrial Product Tax

(Note) Conditions and details of preferential treatments differ according to activities of companies ((1) Manufactures in Brazil, (2) Import sales companies, and (3) companies with investment plans)

In October 2012, the Brazilian government announced the Inovar−Auto which continued the 30% increase of IPI on cars for five years from 2013 to 2017 while making it possible for automobile manufacturers to reduce IPI in exchange for (i) achieving the prescribed fuel efficiency standards, (ii) carrying out certain manufacturing processes for car production in Brazil, (iii) investing a certain amount in domestic research and development etc. For imported cars, the IPI reduction would be applied only in condition to the local content usage etc. At the same time, preferential taxation has been expanded in connection with the local content requirements in wide-ranging fields, such as that of communication network equipment and that of chemicals (fertilizer).

The measure gives unfavorable treatments to imported products in receiving the benefit of tax exemption. Accordingly, it is likely to be inconsistent with Article III (national treatment requirements) of the GATT. Also, it is likely to be inconsistent with Article III of the GATT, Article 2 of TRIMs, and Item (b), Paragraph 1 of Article 3 of the Agreement on Subsidies and Countervailing Measures in encouraging the usage of local contents.

1. Grant an exemption of IPI increase for certain time period for cars manufactured in Brazil by participating companies.

2. Allow reduction of IPI increase up to 30% for cars imported by participating companies up to 4,800 cars per year, in proportion to the local content usage etc..

(1) Achieving the prescribed fuel efficiency standards by October 2017(fuel efficiency of new cars in 2017 would improve by 12% compared to that in 2012.)

(2) Carrying out certain manufacturing processes such as assembly and pressing in Brazil.

(3) Investing a certain amount in domestic research and development, or engineering etc.

(4) Participating in vehicle labeling program.

Conditions for participating in the Inovar−Auto Preferential tax treatment to participating companies

The Minister of Economy, Trade and Industry pointed out to the Brazilian Minister of Development, Commerce and Industry the possible infringement of WTO rules in May and November 2012, respectively.

METI Vice-Minister for International Affairs expressed concerns and requested cooperation including information provision at the Japan-Brazil Joint Committee on Promoting Trade and Investment in November 2012.

Japan expressed concerns jointly with the U.S., the EU and Australia at the WTO Council on Trade in Goods in November 2012. and March 2013 as well as the Market Access Committee in October 2011.

In December 2013, the EU requested bilateral consultations under the WTO dispute settlement procedures (including fields other than automobiles) and Japan also requested participation as a third party (but was rejected by the Brazilian government).

Priorities

7

Japan continues to request the elimination of the measures and corrections by utilizing the framework of bilateral consultations and WTO Committees.

Current Status

Background

Summary of Measures

・China has introduced quantitative restrictions on the export of rare earths, tungsten and molybdenum, which are significant strategic resources, sequentially since 1999, and has imposed export duties since 2006 (at 25% at the largest).

・In July 2010, the Chinese Ministry of Commerce significantly reduced the export quota for rare earths for the latter half of 2010. Since September of the same year, export of rare earths from China to Japan has been stagnant.

・China’s introduction of export regulations on rare earths is in violation of the WTO Agreement.

□ Since 2010, bilateral diplomatic consultations have been held repeatedly at a ministerial level. □ In March 2012, Japan requested, together with the United States and the EU, consultations under the WTO Agreements with regard to three items

(rare earths, tungsten and molybdenum). Japan, the U.S. and the EU jointly held WTO consultations with China in April 2012. □ Japan requested the establishment of a DSB panel, together with the U.S. and the EU, in June 2012 and the panel was established in July 2012. □ On March 26, 2014, the panel issued a report that completely recognizes the arguments by Japan, the United States and the EU, ruling that China’s

export regulations are inconsistent with the GATT and China’s WTO accession protocol.

China: Export Restrictions on Rare Earths

8

Priorities

In March 2014, the panel issued the final report completely recognizing the arguments by Japan, the United States and the EU.

Achievements

Summary of Measures

Summary of the Panel Report

Background

● Export duties Export duties imposed by China violate the prohibition of the imposition of duties on goods by reason of exportation prescribed in Article 11, paragraph (3) of China’s WTO accession protocol. China cannot invoke Article XX of the GATT (grounds for justification) in relation to Article 11, paragraph (3) of China’s WTO accession protocol. Even if invocation is permitted, export duties imposed by China do not fall under the category of measures necessary for preserving the environment as prescribed in (b) of Article XX of the GATT and cannot be justified. ● Export quotas Export quotas imposed by China violate the prohibition of the imposition of quantitative restrictions prescribed in paragraph (1) of Article XI of the GATT. Said export quotas do not fall under the category of measures pertaining to the preservation of limited natural resources as prescribed in (g) of Article XX of the GATT and cannot be justified. ● Restrictions on trade rights Restrictions on trade rights, such as requirements for minimum stated capital and export performance, imposed by China violate the prohibition of restrictions on trade rights prescribed in Article 5, paragraph (1) of China’s WTO accession protocol and Articles 83 and 84 of the report of the working group. Said restrictions on trade rights do not fall under the category of measures pertaining to the preservation of limited natural resources as prescribed in (g) of Article XX of the GATT and cannot be justified.

China: AD Measure on Japanese High-Performance Stainless Steel Seamless Tubes

September 8 2011 MOFCOM gave a public notice of the initiation of AD investigation. September 28 2011 Japanese companies filed countersuits (Registration for participating in the investigation). October 14 2011 The Minister of Economy, Trade and Industry requested the Chinese Minister of Commerce for consideration of Japanese companies regarding this AD case. METI Vice-Minister for International Affairs and Director-General of Manufacturing Industries Bureau requested high-level officials of MOFCOM and

Ministry of Industry and Information Technology to exclude Japanese products. May 8 2012 MOFCOM gave a public notice of a preliminary determination on AD measures (Provisional AD duties were imposed from May 9). May 12 2012 The Minister of Economy, Trade and Industry requested the Chinese Minister of Commerce to exclude Japanese products. August 7 2012 MOFCOM disclosed essential facts on the industry injury investigation. August 31 2012 MOFCOM gave a public notice of extension of the investigation period by half year (Until March 8 of the following year). September 26 2012 MOFCOM disclosed essential facts on the dumping investigation (Dumping margins were revised). November 8 2012 MOFCOM gave a public notice of the final determination. December 18 2012 The Japan Iron and Steel Federation and Special Steel Association of JAPAN jointly submitted a request letter to the Minister of Economy, Trade and Industry to bring this case to the WTO dispute settlement mechanism. December 20 2012 The Japanese government requested consultations with the Chinese government under the WTO Agreement. January 31- February 1 2013 The consultations were held in Tokyo (EU participated as a third party). April 11 2013 The Japanese government requested the establishment of a panel under the WTO Agreement. June 13 2013 EU requested bilateral consultations. August 16 2013 EU requested the establishment of a panel and the panel was established in the same month.

Priorities

9

Japan will request the termination of the measures and corrections through the WTO dispute settlement procedures. Current Status

On November 8, 2012, Chinese Ministry of Commerce (MOFCOM) gave a public notice of the final determination to impose the anti-dumping (AD) measure (AD duties to be imposed in the coming 5 years) regarding the AD investigation on Japanese and EU high-performance stainless steel seamless tubes.

The AD measure is highly likely to be inconsistent with the WTO AD Agreement because (i) flaws in the determination of injury and causation; almost all Japanese export products are high-grade steel used in ultra supercritical boilers in coal-fired power plants, so there are no competing companies with Japanese export products in China now and it seems to be no injury to the Chinese domestic industry nevertheless injury and causation was determined (ii) flaws in investigation procedures such as insufficient disclosure of essential facts.

Background

Summary of Measures

Inconsistent with Article XI of the GATT (general elimination of quantitative restrictions)

Japanese companies are affected, and some goods have become de facto impossible to export to Argentina.

Since 2009, requests have been continuously made from senior executive of the government of Japan. Japan continued to express concerns at the Counsel for Trade in Goods and the Committee on Import Licensing.

In July 2012, Japanese industry* requested action toward the government of Japan. * JETRO, Japan Machinery Center for Trade and Investment and JEITA, The Tokyo Chamber of Commerce and Industry, and The Japan Chamber of Commerce and Industry. The EU (in May 2012) and Japan, the United States and Mexico (in August 2012) requested consultations. Japan held consultation in

September. In December 2012, Japan, jointly with the United States and the EU requested the establishment of a panel. The panel was established in

January 28, 2013. The case is still pending.

Argentina: Import Restriction on a Wide Range of Items

After the global financial crisis in 2008, Argentina has introduced non-automatic licenses (targeting 400 items on the basis of HS codes).

The number of items subject to the system was increased to 600 in February 2011. In many cases, it took 100 days or more to issue an import license, and as a result, export from Japanese companies to Argentina has been delayed (Export of automobiles, their parts, motorcycles, cell phones, PCs, tires etc. has been affected).

Moreover, the trade balancing requirements (requiring one-dollar export as a condition for one-dollar import) and the prior import declaration requirement were introduced for importers, with the effect of restricting imports.

Although there has some progress including the abolition of non-automatic import licenses on January 26, 2013 (just before the establishment of the panel), other measures (trade balancing requirements and prior import declaration requirements) are still in place.

Priorities

The Argentina government Traders

Apply for an import license

Import Restriction by imposing conditions

Non-automatic licenses Trade balancing requirements Prior import declaration requirements

Has been abolished

10

Japan will request the elimination of the measures and corrections through the WTO dispute settlement procedures. Current Status

Summary of Measures

Background

【Number of automobiles sold in Ukraine】 【Number of imported automobiles in Ukraine】

Source: All-Ukrainian Association of Automobile Importers and Dealers

Source: Association of Ukrainian Motor Vehicle Manufacturers and All-Ukrainian Association of Automobile Importers and Dealers

(1,000 vehicles)

376

61.3

106.7

050

100150200250300350400

2008 2009 2010

314.7

60.5 49.6

295.5

114.7 119.9

48.4%

65.5% 70.7%

0%10%20%30%40%50%60%70%80%

0

100

200

300

400

500

600

700

2008 2009 2010

国内生産車 輸入車 輸入車シェア

Ukraine: Imposition of Safeguard Measures against Automobiles Priorities

11

Background (1,000 vehicles) Domestic automobiles

Imported automobiles

Share of imported automobiles October 2011, April 2012 Japan expressed concerns at the WTO SG

Committee (jointly with EU in October, and with EU and Korea in April) June 2012 Director General of Manufacturing Industries Bureau in METI sent a letter requesting suspension of implementation to Ukrainian Minister of Economic Development and Trade March 2013 Japan expressed concerns at the WTO Council on Trade in Goods April 2013 Japan requested the consultations with Ukraine under the SG Agreement. Japan expressed concerns at the WTO SG Committee June 2013 Japanese Vice Minister of Economy, Trade and Industry, requested the Ukrainian Minister of Environment and Energy for the elimination of the measures. July 2013 Japan raised the issue at the WTO Council on Trade in Goods. August 2013 Japanese Minister for Foreign Affairs, requested Ukrainian Minister for Foreign Affairs, for the elimination of the measures. October 2013 Japan requested consultations with Ukraine under the WTO dispute settlement procedures. February 2014 Japan requested the establishment of a WTO panel. March 2014 The WTO panel was established.

In March 2013, The WTO panel was established and the Panel proceedings have been initiated. Current Status

Summary of measures July 2011 : The Ukrainian government initiated the SG investigation on automobiles. April 2012: The Inter-Departmental Commission for International Trade of Ukraine decided the imposition of the SG measures. - Details of the final decision and the timing of the imposition of the measures were not made public. - Taxation of 6.46% on 1000-1500cc engine cars and 15.1% on 1500-2200cc engine cars. March 2013: The imposition of the SG measures was announced. They would take effect after 30 days from the announcement date (March 14, 2013)

(effective for 3 years), with the tax rates of 6.46% on cars of 1000-1500cc displacement, 12.95% on 1500-2000cc displacement. 14 April 2013: The measure was invoked. The number of imported cars in Ukraine decreased drastically between 2008 and 2010 (The number of imported cars from Japan in 2010 did not reach the level of those

compared to in 2008) → The SG measures at issue are highly likely to be inconsistent with the requirements of the SG Agreement - e.g. “increase of import”, causation between “increase

of import” and damage to domestic industry.

The United States imposes anti-dumping duties by determining dumping exports by foreign companies based on an unjustified calculation method called “zeroing.”

Japanese bearings industry has been imposed unjustified AD duties based on zeroing since 1989. For its annual export to the United States of about ¥11.6 billion, it is paying excessive AD duties of about ¥1(one) billion.

Summary of measures

2. Actions going forward In May 2013, the Japanese bearing industry lost the case in an appeal court in the United States and the continuation of the AD duties on ball

bearings was determined. Japan needs to closely watch whether zeroing is abolished in the administrative reviews relating to the AD duties. (In the sunset review procedure, there was no application filed by US domestic industry for continuation of duties and thus the United States revoked the AD order on Japanese ball bearings in March 2014.)

There are concerns that the United States utilizes the targeted dumping methodology, in lieu of zeroing. South Korea and China are already contesting the consistency of the U.S. determination of targeted dumping with the WTO Agreements. Japan participates in these cases as a third country and pays attention to possible application of targeted dumping methodologies to Japanese product.

1. Background up to the present In November 2004, Japan requested consultations with the United States under the WTO Agreement. In January 2007, the WTO Appellate Body made a determination that zeroing was inconsistent with the WTO agreement, and recommended the

United States to abolish it. In August 2009, the WTO Appellant Body determined that the United States had not implemented the WTO recommendations after their deadline. In February 2012, Japan and the United States agreed on a memorandum for resolution of this dispute. Based on the memorandum, the United

States amended the Department of Commerce regulation for abolition of zeroing.

Background

In February 2012, Japan and the United States agreed on a memorandum. The United States amended the Department of Commerce regulation for abolition of zeroing.

In March 2014, the United States revoked the AD duty order on ball bearings from Japan.

Achievements

United States: Zeroing Priorities

12

Background

Summary In May 2009, the Province of Ontario of Canada enacted the “Green Energy Act,” and thereby established a fixed price purchase system (Feed-in

Tariff Program). The system stipulates that electricity to be purchased should be generated by electricity generating facilities with a certain percentage or more of value-added in the Province of Ontario.” (local content requirements)

The measure is inconsistent with Paragraph 4, Article 3 of the GATT (national treatment) In addition to the resolution of this problem, it is also important to prevent the spread of similar measures in other countries.

･June 2010 On the margin of APEC Trade Ministers’ Meeting, the Minister of Economy, Trade and Industry and the Foreign Minister requested correction of measures to the Canadian Minister of International Trade. In September, consultations under the WTO agreements were requested. In October, WTO consultations were held.

･January 2011 Province of Ontario raised the local content ratio to 60%. In June, absent satisfactory response from Canada, Japan requested the establishment of a panel. The panel was established in July. In August, the EU requested WTO consultations.

･March and May 2012 Panel meetings were held (Jointly with the EU. The United States participated as a third party and supported the arguments made by Japan and the EU). ･June 2012 On the margin of APEC Trade Ministers meeting, the Minister of Economy, Trade and Industry requested the Canadian Minister of International Trade to voluntarily

rectify the measure before the issuance of a panel report. ･December 2012 The panel published a report (which accepted most of the arguments made by Japan and the EU, and recommended correction by Canada. ･February 2013 Canada (on Feb 5), Japan and the EU (on Feb 11) appealed, respectively. ･May 2013 The Appellate Body issued its report (which held Panel’s rulings and accepted the arguments made by Japan and the EU). ･August 2013 The Province of Ontario reduced the local content requirements (60% → 19 to 28%) as interim measures (implementation deadline: March 24, 2014). ･March 2014 A bill to eliminate the local content requirements is now under deliberation. The deadline was extended up until the end of the term of the assembly (June 5, 2014).

Ontario Power Authority

Generators etc.

Local content requirements

Imported photovoltaic cells do not meet the local content requirements, and therefore, generators are not going to buy them.

It is possible to procure parts and assemble them in the Province of Ontario, and thus meeting the local content requirements.

Imported photovoltaic cells etc.

Photovoltaic cells etc. manufactured in the Province of Ontario

Canada: Local Content Requirements under the Ontario’s Feed-in Tariff Program Priorities

13

In May 2013, the Appellate Body published a report to support Japan’s arguments. Canada is now making efforts for implementing the recommendations.

Achievements

New Chapter (2): Monitoring of Trade Policies and Measures (Part II, Chapter 18)

New Chapter (1):General and Security Exceptions (Part II, Chapter 4)

14

General Exceptions are often invoked in the WTO dispute settlement procedures(Note 2) and its interpretation has been sophisticated in recent years.

(Note 2) One of the representative cases is “China: Export Restrictions on Raw Materials (i.e. Rare Earths etc.)” on page 6. This Chapter introduces the interpretation of general and security exceptions and its practical viewpoints. We hope

that this helps the industry analyze the WTO consistency caused by new measures. We also expect that this Chapter enables readers to acquire better understanding about individual cases explained in Part I.

The Major roles of the WTO are to make rules, have related parties observe those rules and correct any violations. For this purpose, the WTO has (i) a negotiating function (establishment and improvements of trade rules through multilateral negotiations), (ii) a monitoring function (prevention of protectionist measures through the use of the multilateral monitoring system), and (iii) a dispute settlement function (settlement of trade disputes through quasi-judicial procedures).

In light of the recent expansion of protectionist measures and a resulting increase in trade disputes, mutual monitoring has become more and more important, which prevents the introduction of problematic measures and the expansion of similar measures to other countries.

This Chapter introduces the activities of WTO Committees and the Trade Policy Review Mechanism (TPRM) as the WTO’s monitoring function, and also explains the significance and evaluation thereof. Furthermore, the Chapter outlines monitoring activities by various international organizations other than the WTO (issuance of miscellaneous reports, etc.) to overview how the WTO and these organizations are monitoring international trade and investment.

The WTO Agreements contain general and security exceptions, for the purpose of balancing the principle of trade liberalization and the Member’s regulatory authority (Articles XX and XXI of GATT).

These exceptions prohibit trade restrictive measures which aim nominally to conserve natural resources or to protect environment, while permitting trade restrictions based on legitimate objectives.(Note 1)

(Note 1) Border measure by customs to crack down counterfeit goods for the purpose of preventing distribution of counterfeit goods in the country

New Colum (2): Resources/Energy and the WTO Rules

15

Resource-rich countries are acceding to the WTO successively. Most of the suppliers for Japan, which imports a large amount of resources and energy, are already members of the WTO.

With demand for resources and energy expected to further expand globally, the fact that resource-rich countries have thus come to be subject to international rules, i.e., the WTO Agreements, has a significant potential impact on Japan that needs to secure a certain amount of resources and energy by depending on imports.

This column compiles what are regulated to what extent under the WTO Agreements.

New Colum (1): Global Distribution of Counterfeit Goods and Problems in Legal Systems and Their Operation

(Source) Ministry of Finance

Background/Purpose ・ In recent years, the distribution of counterfeit goods has become more and more serious on a global scale, in

tandem with the progress of economic globalization. This column aims to bring to light the problems of counterfeit goods by generally overviewing this issue.

Current Status/Challenges ・ Counterfeit goods are globally diffused from China. Their modus operandi has become sophisticated

and ingenious under an organized system of international specialization. ・ There exist problems with respect to legal systems and their practices in each country, which make

difficult effective enforcement of intellectual property rights. Future Measures Japan should Take ・ Full utilization of the framework for negotiation, including EPAs/FTAs: further promote enhanced level of protection of

intellectual property rights and strengthened measures against counterfeit goods, while securing each country’s current compliance with intellectual property protection rules.

・ Utilization of other frameworks: request improvements through intergovernmental dialogues and expand quantitatively and qualitatively cooperative approaches through seminars, training sessions and other awareness-raising activities.

・Discriminatory treatment and export restrictions by exporting countries ・Whether the preservation of exhaustible natural resources justifies trade restrictions ・Discriminatory treatment and restrictions during transit ・Whether activities of state-owned enterprises can be regulated ・Industrial policy concerning new energy