RESTRICTEDWORLD TRADE
ORGANIZATIONG/SG/Q2/JPN/2
14 June 2001
(01-2953)
Committee on Safeguards Original:  English
AGREEMENT ON SAFEGUARDS ON INITIATION OF
AN INVESTIGATION AND THE REASONS FOR IT
NOTIFICATION UNDER ARTICLE 12.4 OF THE AGREEMENT ON
SAFEGUARDS BEFORE TAKING A PROVISIONAL SAFEGUARDS
MEASURE REFERRED TO IN ARTICLE 6
NOTIFICATION PURSUANT TO ARTICLE 9, FOOTNOTE 2
OF THE AGREEMENT ON SAFEGUARDS
Replies to Questions Posed by the UNITED STATES1
Regarding the Notifications of JAPAN2
The following communication, dated 11 June 2001, has been received from the Permanent
Mission of Japan.
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Reason for safeguards (food security?)
Q1. Has Japan considered food security as an element in its decision to implement
safeguards. If so, on what provision of the Safeguard Agreement has Japan based this
argument?
Reply
In deciding the application of the provisional safeguard measures, Japan has considered
whether there are critical circumstances where dela y would cause damage which it would be difficult
to repair, and whether there is clear evidence that increased imports have caused or are threatening to
cause serious injury, in accordance with the WTO Agreement on Safeguards and other relevant
provisions.
Competent Authority
Q2. Are all three of these entities the competen t authorities for all three investigations?  If
so, which entity is actually conducting the investigation? Are they conducting the investigationin tandem?  If so, please describe how they do so in practice.
                                                     
1 G/SG/Q2/JPN/1.
2 G/SG/N/6/JPN/1 & Corr.1, G/SG/N/7/JPN/1, G/SG/N/11/JPN/1.G/SG/Q2/JPN/2
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Reply
Under Japan's laws, regulations and administrative procedures relating to safeguard measures,
safeguard investigation shall be carried out jointly by the Ministry of Finance, the Ministry of
Economy, Trade and Industry, and the ministry in charge of the industry concerned (in the case ofwelsh onions, shiitake mushrooms and tatami-omote, the ministry concerned is the Ministry of
Agriculture, Forestry and Fisheries). These three ministries, as the competent authorities  provided in
the Agreement on Safeguards, hold consultation and decide issues relating to safeguard investigations.
To be more specific, the safeguard investigation is conducted by the investigation team, which
consists of the officials in charge of safeguard investigations from these three ministries.
Determination of Threat of Serious Injury
A. Welsh OnionsQ3. No comparable 1999 part year data.   Data are difficult to evaluate.  The Annex to the
report indicates that some year 2000 data are part year data; because the report does notprovide data for the comparable period of 1999, it  is unclear what if any weight can be given to
part year 2000 data.  For example, it is not clear whether the data are impacted by seasonal
factors.  The absence of a separate column for comparable 1999 data makes it difficult to tell
whether other year 2000 data, such as sales and pr ofitability, are also part year data, and would
be significantly higher if presented on an annualized basis (assuming such data would not bedistorted by seasonal factors).
Reply
1. Among the figures shown in Annex I of the notification (G/SG/N/7/JPN/1), all figures under
items except "5 Production" and "9 Employment" are full year (calendar year ) data from 1996 to
2000 and are comparable among different years.  The data of "5 Production" and "9 Employment"
from 1996 to 1999 are based on the period from April to March next year, while the year 2000 data of
these items are based on the period from April to December.
2. Part year 1999 data (from April to December) of "5 Production" and "9 Employment", which
would be comparable to that of year 2000 (from April to December), is not available, since thestatistics are collected on a production (crop) year ba sis (from April to March next year).  In terms of
the year 2000 data, the data for the period from Apri l to December was collected specifically for the
safeguard investigation in January 2001.  At that point, data for the period of January to March 2001
was not available.
Q4. Decline in production inconsistent with incr ease in proportion of acreage planted.  Please
explain why production declined in 2000, but the proportion of acreage planted increased.  Do
interim year 2000 production data effectively represent fiscal year 2001 production, or only
about 75 per cent or so of such production?
Reply
Since the figures representing the production of 1996 to 1999 are calculated on a production
(crop) year basis (April to March next year) while that of 2000 is calculated for the period from April
to December, as described above, the year 2000 data does not cover the same period as the data for1996-1999.
Q5. Other causes of injury.   The market share figures appear  to indicate that the Japanese
welsh onion industry had virtually no import competition prior to 1996.  Given this fact, itG/SG/Q2/JPN/2
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seems likely that other factors are at least partially responsible for any serious injury being
suffered by the domestic industry.  What other causes of injury were alleged by the parties
during the investigation to be causing serious injury?  What causes other than increased
imports were considered by the Japanese compet ent authorities?  For example, were weather
conditions considered?
Reply
No interested party presented a view before the deadline that causes other than increased
imports have caused serious injury to the domestic industry.  The competent authorities, however,
considered the influence of weather conditions and other factors on the shipping volume as well as the
trend of demand beside the increased imports factor.  As a result of such consideration, the competentauthorities made a preliminary determination that there was clear evidence that the increased imports
had caused or were threatening to cause serious injury.
Q6.  Factors affecting 1998 data    Why did domestic production fall sharply in 1998, a year in
which imports increased by only a small fracti on of the increase in production?  Why did
profitability increase sharply in that year?  To what extent is domestic production cyclical?
Reply
1.  Because the climate conditions were not favorable for the growth of welsh onion and caused a
bad harvest in Japan, the domestic price rose in 1998.  Therefore, producer's profitability rose.
2.  The change of production volume of welsh onion does not appear to follow any cyclical
pattern.
Q7. Year 2000 profitability data.   Are year 2000 profitability data full year or part year data?
Reply
Year 2000 profitability data are full year (from January to December) data.
Q8. Import sources.   What are the principal source countries of imports, and is there any
basis for concluding that the increase in 1999 and 2000 is temporary?
Reply
Principal sources and volume of imports in 2000 are shown below.
The increase of import volume in 1999 and 2000 was not temporary, because the volume of
imports increased remarkably in 1999 and 2000 and has been  continuing to rise in January and
February 2001.
(unit: ton)
China, P.R.              37,007
Chinese Taipei                   185
Korea                   166
Others                     17G/SG/Q2/JPN/2
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Q9. When considering imposing safeguards, did Japan take into account the prices paid to
growers, or only to the final retail price. (The data provided suggests that Japan only looked at
retail prices.) Did Japan undertake these safeguards to protect growers or resellers? Since
Japan argues that farmers may take products out of cultivation due to lower prices, this is animportant matter.
Reply
This provisional safeguard measure has been taken to remedy the injury to the welsh onion
producers, which was considered to be the domestic industry in the investigation.  The figures shown
as domestic prices in the notification represent producers' selling prices, in other words, pricesreceived by the producers.
Q10. If Japanese producers are having serious problems based on lower prices, it suggests
that the internal cost/pricing st ructure in Japan for welsh onions is very much out of step with
world prices and that imports are appropriately causing a readjustment of labour and capitalinvestment in Japan.
Reply
Although the market share of imported welsh onion was 0.4 per cent in 1996-1997 and
1.7 per cent in 1998, it grew in a short period to reach 5.0 per cent in 1999 and 8.2 per cent in 2000,
resulting in remarkable fall in producers' selling price and profitability.
Since domestic producers have not had enough time to cope with this sudden increase of
imports, and the prices of imported  welsh onion have fallen along with the decline of those ofdomestic welsh onion resulting in a situation where the prices have fallen continuously, there are the
circumstances where the safeguard measure is needed.
B. Shiitake Mushrooms
Q11. Year 2000 data.   Are year 2000 data in the Annex ta bles full year or partial year data?
Reply
Year 2000 data are full year (from January to December) data.
Q12. Other causes of injury.   What causes of injury, other than increased imports, were
alleged by the parties during the investigation to  be causing serious injury?  What causes other
than increased imports were considered by the Japanese competent authorities?  For example,
were there any allegations of a shortage of the domestic product, or of a shift in consumer taste
from the domestic product to the imported product?  Any allegations in a shift in the form of
the product consumed, such as in the size of mushroom preferred or in the degree of
preparation?
Reply
No interested party presented a view before the deadline that causes other than increased
imports have caused serious injury to the domestic industry.  The competent authorities, however,
have conducted fact-finding surveys among the producers, importers, distributors, demanders and
consumers regarding not only the increase of imports but also the trend of demand, changes in
consumers' preference, difference of use between the domestic and imported products and so on.  As aG/SG/Q2/JPN/2
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result of this, the competent authorities made a preliminary determination that there was clear
evidence that the increased imports had caused or were threatening to cause serious injury.
C. Tatami-Omote
Q13. Definition of domestic industry, industry data.   Did the competent authorities include the
growers of igusa, the raw material in tatami, as part of the domestic industry?  If so, under what
theory?  Did the Japanese competent authorit ies have a full data series (production,
employment, profitability, etc.) for growers as well as weavers? If not, how did they conclude
that there is clear evidence that the industry as a whole is seriously injured?
Reply
Almost all igusa producers produce igusa (as raw material) and tatami-omote in a continuous
line of production.  Since about 90 per cent of the gross national production of tatami-omote is
produced by the igusa producers, the competent authorities considered that the domestic industry can
be represented by the igusa producers and evaluated the injury to the domestic industry based upondata pertaining to the igusa producers.
Q14. Other causes of injury.   What causes of injury, other than increased imports, were
alleged by the parties during the investigation to  be causing serious injury?  What causes other
than increased imports were considered by the Japanese competent authorities?  Does the
report of the Japanese competent authorities indicate whether there are any distinguishing
characteristics between the imported and domestic  products, such as in average size, tightness
of weave, colour, etc?  Does the report address the decline in domestic production of tatami
related to the decline in plantings of igusa, and if so, what significance does it attach between
this decline and the decline in the production of tatami-omote?
Reply
1. Besides increased imports, structural factors such as aging among producers and lack of
successors, decline of demand, consumer's preference for low-price products, and lack of producers'
management efforts were alleged in the interested parties' presentation of their views before the
deadline.
2. The competent authorities considered such structural factors as aging among producers and
lack of successors, trend of demand, the effect of tatami-omote made of chemical materials, and
producers' management efforts, and upon such consideration, made a preliminary determination that
there was clear evidence that the increased imports had caused or were threatening to cause seriousinjury.
3. Also, since Japan is the only market of tatami-omote, both imported and domestic products
are used as the material of tatami and there are no difference in use.  In addition, generally speaking,
there are no distinguishable differences between imported and domestic products in the average size,tightness of weave, colour, etc.
4. As shown in the notification, the period in which planted acreage of igusa and production of
domestic tatami-omote declined and the period in which imports of tatami-omote increased are
contemporaneous.  Since tatami-omote is made of igusa, the decrease of the planted acreage of igusadirectly affects domestic tatami-omote production.G/SG/Q2/JPN/2
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Remedy
Q15. Who decided upon the form of the remedies?  One of the Ministries? Which one?  Some
other entity?  Please identify.
Q16. If some other entity decided on the form of the remedy, did the competent authorities
recommend a remedy to that entity?  If so, what was the recommended remedy?  Did the entity
that selected the remedy follow the competent authorities' recommendation?  Is it required to
do so?
Reply
The specific measures to be taken as these provisional safeguard measures have been
ultimately decided by the Government at a Cabinet meeting, after the consultations among the three
ministries, namely, the Ministry of Finance, the Ministry of Economy, Trade and Industry and the
Ministry of Agriculture, Forestry and Fisheries, which are the competent authorities for these
safeguard investigations.
Q17. How did Japan settle upon the in-quota quantities in the TRQs?
Reply
(1) Welsh onion
As the duration of the provisional measure is 200 days, the in-quota quantity was set at the
amount representing the average import volume of a 200 day period during the three years from 1997
to 1999.
(2) Shiitake mushroomTaking into account the duration of the provisional measure which is 200 days and the
seasonal factor during that period, the in-quota quantity was set at the amount representing the
average import volume of the corresponding period during the three years from 1997 to 1999.
(3) Tatami-omote
Taking into account the duration of the provisional measure which  is 200 days and the
seasonal factor during that period, the in-quota quantity was set at the amount representing the
average import volume of the corresponding period during the three years from 1997 to 1999.
Q18. Your notification describes the over-quota ta riff rates in terms of yen/kg.  What are the
rates in terms of per cent ad valorem?
Reply
The ad valorem equivalent of the over-quota tariff rates are 256 per cent for welsh onion,
266 per cent for shiitake mushroom and 106 per cent for tatami-omote, respectively in relation to the
most recent c.i.f. prices available at the beginning  of application of provisional safeguard measures.
Article 7 of the Safeguard Agreement calls on members to impose safeguards for the
minimum period necessary to prevent or remedy injury and to facilitate adjustment.
Agriculture Minister Yatsu told the Yomiuri Shimbun on 23 April that "we hope domestic
producers and distributors understand that the safeguard measures are meant to give then timeG/SG/Q2/JPN/2
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to restructure their industries."  Whether we change the measures from temporary to
permanent ones depends on how they implement reforms."
(Not a question.)
Q19. What "adjustment" or "restructuring"  does Japan have in mind over the
short/medium term to make its welsh onion, tatami reed and shiitake mushrooms producers
competitive or to assist them in a non-trade distorting manner?  For the other products under
consideration for safeguards, what "adjustment" possibilities is Japan reviewing?  How quickly
will adjustment plans be implemented?
Reply
Decisions on whether or not to take definiti ve safeguard measures for welsh onion, shiitake
mushroom, and tatami-omote which are subject to the provisional safeguard measures will be made
upon consideration of measures taken for structural adjustment.
Specifically, measures to improve the international competitiveness of the domestic industries
such as below will be adopted and structural adjustment to strengthen the domestic industries will be
promoted at every stage from produc tion to distribution and consumption:
1. On the production side, reduction of production costs by introduction of
labour-saving machines; and quality improvement and differentiation of domestic
products by technology development and diffusion.
2. On the marketing side, encouraging closer cooperation between the actual
demanders and producers; reducing the distribution costs by simplification of
standards and utilization of the IT technology; and upgrading distribution systems byimprovement of precooling and refrigeration storage facilities.
Q20. Could the Japanese Government explain what steps the domestic industry is taking to
improve international competitiveness?
Reply
With regard to the three products that the provisional safeguard measures have been taken,
measures to foster industries with international competitiveness will be adopted by this summer and
structural adjustment will be promoted to strengthen the domestic industries at every stage from
production to distribution and consumption.
Critical Circumstances
A. Welsh OnionQ21. The WTO Safeguards Agreement requires "clear evidence" that increased imports are
causing or threatening to cause serious inju ry before a Member may impose provisional
measures.  The notification relies on the results  of a survey to "assume" that production of
welsh onions will decline if prices remain low.  How does Japan reconcile the requirement for
"clear evidence" with its reliance on assumptions?G/SG/Q2/JPN/2
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Reply
1. "The result of a survey to 'assume' that production of welsh onions will decline if prices
remain low" stated in the question appears to refer to the explanation about the critical circumstances
where delay would cause damage which it would be difficult to repair  in the notification.
2. The welsh onion producers' profitability with regard to the harvest of October to
December 2000 fell by 72 percent from the same period of the preceding year, and in Kanto and
Kyushu area, which are major welsh onion production areas, the producers operated at a loss.  On the
other hand, the imports continued to increase after January 2001, and the prices have been low.
As described above, considering that producers were operating at a loss in  main production
areas where more than half of domestic welsh onion is produced and that the prices continued to be
low, the competent authorities concluded that there was critical circumstances where delay would
cause damage which it would be difficult to repair.
It should also be noted that Article 6 of the Agreement on Safeguards provides that clear
evidence  that increased imports have caused or are threatening to cause serious injury  is necessary in
taking a provisional safeguard measure, while the requirement of clear evidence  is not relevant to the
existence of critical circumstances where delay would cause damage which it would be difficult to
repair .
3. Furthermore, the clear evidence that increased imports have caused or are threatening to cause
serious injury has been described in the part of “5. Basis for making a preliminary determination” in
the notification (G/SG/N/7/JPN/1).
Q22. The notification states that "18 per cent of the producers responded that they will
decrease or discontinue their production of wels h onion if the current decline in the price level
continues."  This suggests that 82 per cent of the producers responded that they would not
decrease or discontinue their production under such circumstances.  How does Japan reconcile
this apparent fact with the exis tence of critical circumstances?
Reply
1. Unlike other vegetables in Japan, the planted acreage of welsh onion has been steadily
increasing until very recently.  In view of this, it is a serious situation that 18 per cent of the producers
responded that they would decrease or discontinue their production of welsh onion.
2. As 17 per cent of the farmers in the same survey answered that they would increase the
production if the prices rise, many farmers expect price recovery in the future.  (As a matter of fact, in
the investigation, more than 30 per cent of farmer s who increased the planted acreage in 2000 replied
that they did so because they were anticipating that the year 2001 price would not be necessarily as
low as that of 2000.)  Actually, however, the volume of imports in February 2001 was 2.8 times as
much as that of the same period of 2000, the prices fell, and there were production areas whereproducers were having difficulties to  continue operations because of deficits.  Taking these facts into
consideration, the competent authorities determined that there were critical circumstances.
Q23. Japan states that if planted acreage shrinks and imported product "overwhelms the
market", recovery of domestic prices and production area cannot be expected.  What is thebasis for this assertion, which appears to be merely argumentative?G/SG/Q2/JPN/2
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Q24. Also, the import data in Annex I indica tes that imports currently hold a 8.2 per cent
market share.  How can such a low market share realistically be characterized as threatening to
"overwhelm the market"?
Reply
The volume of imports rapidly increased since 1999, and that of 2000 recorded 76.3 per cent
increase from the previous year.  The total volume of imports in January and February 2001 was
8,421 tonnes which showed 78.3 per cent increase from the same period of 2000, indicating  a stable
pace of import increase.
On the other hand, there is no difference in quality and use between the domestic and import
products, and prices of import products are lower than those of domestic products.  Therefore, the
competent authorities concluded that if this import increase continued it would boost the share of
import products in the domestic market and recovery of the domestic prices and the size of planted
acreage could not be anticipated.
B. Shiitake mushrooms
Q25. In support of its critical circumstances finding for shiitake mushrooms, Japan cites little
more than the evidence that it claims demonstrat es serious injury and causation.  How do these
elements support a finding that delay in imposing relief would cause damage which it would bedifficult to repair?
Reply
Based on the facts such as those shown below, in addition to the data regarding the nine
factors provided in the Article 4 of the Safeguards Agreement, the competent authorities have found
that, if provisional safeguard measure were not taken, domestic reproduction would become difficult
and there were critical circumstances that delay would cause damage which it would be difficult to
repair:
(a) Imports have been continuing to increase in 2001 and the domestic price of shiitake
mushrooms has been falling.
(b) The number of shiitake mushroom producers operating at a loss have been rapidly
increasing.
(c) An amount of spawning, which is equivalent to seeding of farm products, has been
decreasing.
C. Tatami-Omote
Q26. As with shiitake mushrooms, the data that Japan cites in support of its imposition of
provisional measures amounts to little more than  the evidence it claims demonstrates serious
injury and causation.  How do these elements support a finding that delay in imposing relief
would cause damage which it would be difficult to repair?
Reply
Based on the facts such as those shown below, in addition to the data regarding the nine
factors provided in the Article 4 of the Safeguards Agreement, the competent authorities have foundG/SG/Q2/JPN/2
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that there are critical circumstances that delay would cause damage which it would be difficult to
repair :
(a) Imports have been continuing to increase in 2001.
(b) Low level of domestic price has been continuing with the continued import increase.
(c) Decrease in the planted acreage of igusa continues, and the profit level of igusa
producers records a historical low, which already is almost beyond their capacity.
(d) Igusa production requires extensive investment in equipments such as tatami-omote
loom.  Once producers quit igusa production and abandon their productionequipments, it will become difficult to resume production.  Unless a provisional
safeguard measure is taken at this time of the year when farms make year-round
farming plan, it would be difficult to make igusa producers refrain from abandoning
their equipments.
Q27. Japan also claims that a survey of those who have discontinued igusa production shows
that 64 per cent no longer own tatami-omote looms and 68 per cent do not intend to resume
production even though prices will rise in the future.  Given the results of this survey, which
indicates that any damage that has already occu rred is irreparable, how does this support the
conclusion that a delay in taking action would cause damage that would be difficult to repair?
Reply
1. Since igusa producers produce igusa and tatami -omote in a continuous line of production,
they need extensive investment in equipments such as tatami-omote loom.  The data shown hereillustrates that once igusa producers quit igusa production and abandon their equipments, it will
become very difficult for them to resume production.
2. A delay in taking a safeguard measure would make current producers of igusa quit igusa
production and  abandon their equipments.  Judging from the data, such a situation would make it
difficult for the producers to resume igusa production.  Therefore, the competent authorities have
found that delay would cause damage which it would be difficult to repair.
Voluntary restraints
Q28. Given the Article 11 admonition against such measures, how does Japan justify seeking
VRA's from a nation that is soon to accede as a WTO Member?
Reply
While the talks between relevant government authorities of Japan and China have been
continuing, no agreement has been reached at this point.
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