WORLD TRADE
ORGANIZATIONWT/WGTI/W/112
12 April 2002
(02-2015)
Working Group on the Relationship
between Trade and InvestmentOriginal:  English
COMMUNICATION FROM JAPAN
The following communication, dated 11 April 2002, has been received from the Permanent
Mission of Japan.
_______________
TRANSPARENCY
I. INTRODUCTION
1. Transparency is a basic principle that is common and indeed crucial to all the WTO
agreements, and takes a natural place in Paragraph 22 of the Doha Ministerial Declaration as an
intrinsic element in consideration of an effect ive investment framework.  At past Working Group
meetings, Japan has submitted papers on transparency-related issues (WT/WGTI/W/75) and
transparency disciplines in the WTO Agreements (WT/WGTI/W/87), specifically highlighting the
importance of transparency.  Section A of this paper focuses on cases demonstrating the importance
of transparency to the investment environment.  Section B identifies key points in considering
transparency disciplines, while Section C moves on to consider means of securing transparency.
A. I MPORTANCE OF TRANSPARENCY TO THE INVESTMENT ENVIRONMENT
2. Transparency in the investment host country is a critical factor, which leads to the expansion
of FDI inflows.  A high degree of transparency encourages investors’ investment decisions and
attracts long-term, stable investment, boosting the social welfare and economic efficiency of the host
country.  Conversely, a lack of transparency can mean the loss of investment that would have profited
the host country.  
3. In fact, when investors are drawing up and finali zing their investment plans, instability and a
lack of necessary information in reference to their economic activities in the host country are regarded
as uneasy factors, and serve to discourage investment.  A questionnaire survey on barriers to the
investment activities of Japanese companies operating overseas (“FDI Strategies of Japanese
Companies in the 21st Century:  Current Status and Forecast”, JETRO, December 2001) placed a lack
of transparency at the top of the list (Annex 1).  
4. Typical problems noted by Japanese companies in pursuing investment activities in host
countries with inadequate transparency are as follows.  Obviously, as these examples are drawn
directly from actual business, they also involve asp ects such as transparency problems combined with
instability and unfairness in rules rather than just simple transparency problems alone.
• Governments provide very little information on investment-related laws and regulations, with
information-gathering incurring additional costs.WT/WGTI/W/112
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• Investment-related laws and regulations are subject to frequent and sudden change, greatly
disrupting business operations.
• Investment-related government enquiry points and the relevant government ministries are not
clearly specified.
• The numerous ministries involved in the procedures required for investment activities result in
unnecessary duplication and the additional burden this imposes.  Such administrative inefficiencyhas a negative impact on business.
• Even where investment-related laws exist, they are not necessarily adequately enforced.  Arbitrary
interpretations are made among ministries, between central and local government and by
individual government officials, with no unifor m position.  There are also many cases of unfair
enforcement.
• Many of the relevant documents available are only written in the local language, which is
extremely inconvenient.  The translation process sometimes leads to differences in thegovernment position and Japanese companies’ interpretation.  Translation also takes time, causing
inconvenience in terms of reflecting the entry into force and amendment of laws in actualbusiness.
• Related laws and ordinances are brought into  force almost immediately after promulgation.
Because the English translation process takes time, companies are not able to respond
immediately upon notification.
• Information on statistics tends to be inaccurate and figures unreliable.
• Confidential information is sometimes leaked to  other companies in the same business.  Local
companies under joint management with Japanese  companies can also conduct a joint venture
with other companies in the same business, and the lack of a confidentiality culture among localemployees means that they are easily bribed.
5. As noted in the previous submission by Japan (WT/WGTI/W/87), the significance of
transparency lies primarily in three points.  Firstly, greater predictability can lessen investor’s risk and
boost investment.  From the investor’s perspective, a high degree of transparency is a critical issue in
that it lends predictability to business activities.  Countries with high levels of transparency inevitably
enjoy an advantage in the selection of investment destinations.  Secondly, lower risk means a higherquality of investment.  In particular, faster administrative procedures for investment facilitate
investment in areas subject to rapid change, such as investment in IT and other high technology areas
that are subject to constant technological innovation.  Thirdly, transparency affects domestic industry
in that it encourages foreign investment and the according indirect stimulation of domestic industry
and otherwise clearly facilitates the promotion of an active relationship between domestic industryand foreign investors.
B. S
COPE AND LEVEL OF TRANSPARENCY PROVISIONS
6. In considering the kind of transparency provisions that could be built into a future investment
framework, particular attention should be given to the scope of rules and level of obligation.
1. Scope
7. Where trade disciplines are essentially confined to imports and exports, direct investment-
related laws, regulations and administrative provisions range far more widely, making the delineation
of scope that much more difficult.  For exampl e, in addition to laws and regulations on incoming
foreign investment, direct investment is also regulated by licensing laws concerning factory
establishment and operation, environmental standards regulations, employment-related laws, tax laws,competition laws, and securities and exchange laws.  It would be worth considering attachment to the
investment framework of an illustrative list of measures covered by the transparency provision as one
possible option in order to clarify the scope of the transparency provision.WT/WGTI/W/112
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2. Level of obligation
8. The merits offered to both investors and host countries by a high degree of transparency were
noted in Section A.  For the investor, a highly pr edictable investment environment means a constant,
stable business environment, saving on unnecessary costs.  For the investment host country, greater
predictability opens the way for more FDI, resultin g in such economic benefits as capital transfer,
technology and management know-how transfer, gr eater employment opportunity, the fostering of a
skilled work force, and the improvement of the level of domestic industry.
9. The highest possible level of obligation should therefore be secured in any future investment
framework.
10. In terms of the level of transparency provisions, firstly, it will be important to identify exactly
which measures will be subject to the said provisions.  Existing agreements address transparency as
follows.  (Annex 2 illustrates which areas are included in which agreements.)
• Publication of the related domestic laws, regulations and systems;
• Notification and provision of information;
• Responses to requests for the supply of information;
• Establishment of enquiry points;
• Domestic judicial and complaints procedures;
• Administrative procedures.
Secondly, consideration should be given to how rigorously these provisions will be pursued.
11. The transparency provision in the GATS provides a useful reference in this regard.  As
members are already committed to transparency under the GATS, they are likely to be reasonably
open to this approach, which would also impose no major burden. In other words, any new investment
framework should secure at least the same level of transparency as in the GATS.
12. GATS deals with transparency in Article 3.  More specifically, members are obligated to
publish promptly and, except in emergency situations, at  the latest by the time of their entry into force,
all relevant measures of general application whic h pertain to or affect the operation of the GATS
(Article 3.1).  Members must also notify the Council on Trade in Services promptly and at least
annually of the introduction of any new, or changes to existing laws, regulations or administrative
guidelines which “significantly affect” trade in services covered by specific market access and
national treatment commitments under the GATS (Article 3.3).  They are also required to establish
one or more enquiry points.  However, a provision is also included which allows flexibility fordeveloping countries on this point (Article 3.4).  Article 3 bis also stipulates that nothing in the GATS
shall require any Member to provide confidential info rmation, the disclosure of which would be contrary
to the public interest, or which would prejudice legitim ate commercial interests of particular enterprises,
public or private.  
13. Among the existing WTO agreements, the Agreement on Technical Barriers to Trade
provides an ideal model in terms of the level of obligation.  The TBT Agreement stipulates that
whenever a relevant international standard does not ex ist or the technical content of a proposed technical
regulation is not in accordance with the technical cont ent of relevant international standards, and if the
technical regulation may have a significant effect on trade of other Members, Members shall notify
other Members through the Secretariat and allow reasonable time for other Members to makecomments in writing.  An annex to the agreement sets the time period in question at 60 days.  While
60 days might seem short, according to the 2001 Report on the WTO Consistency of Trade Policies
by Major Trading Partners, the rate of TBT compliance in 1999 was 61 per cent, 49 per cent in 2000,
demonstrating that the obligation can be met to quite a significant extent.WT/WGTI/W/112
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C. RELATIONSHIP BETWEEN SECURING TRANSPARENCY AND TECHNICAL ASSISTANCE AND
CAPACITY BUILDING
1. Specific means of securing transparency
14. Even where the investment framework defines the scope and level of transparency
obligations, a key issue will in fact be implemen tation—how members will secure the transparency of
investment-related information.  Consideration will therefore need to be given to specific means of
ensuring the effectiveness of transparency provisions.  
15. A number of options are possible in this regard according to the circumstances of the
particular Member country.  Here we present the approach taken by Japan to date, which has also
been indicated in the previous Japanese paper (WT/WGTI/W/87 “Improving Transparency”).  
16. Japan’s approach is of course not a universally applicable panacea, and there may well be
better methods.  In any case, such specific methods are closely related to the above-mentionedspecific level of obligation to be imposed under transparency provisions, and as such are an issue
which member countries will need to consider in parallel with discussion on substantive provisions.
Japanese approach to date:
• Enquiry points for inward investment:  JETRO (Japan External Trade Organization) provides
investment-related information as the enquiry point  for inward investment as a whole.  The Bank
of Japan, its offices and the relevant ministries and agencies deal with queries concerning the
Foreign Exchange and Foreign Trade Law.  Ministry of Foreign Affairs is the enquiry point in
relation to GATS.
• Formulation of Administrative Procedures Law:  the Administrative Procedures Law was
formulated in October 1994, securing rules for prompt, fair and transparent administrative
procedures.   
• Public comment procedures:  in March 1993, procedures for the submission of views on the
formulation, amendment and elimination of regulations were adopted by Cabinet resolution.
• Formulation of Information Disclosure Law:  this law was promulgated in May 1999,
establishing rules for the disclosure of administrative documents.
• Use of the Internet:  the various ministries and agencies are providing information via the
Internet, in addition to which the Administrative Management Bureau within the Ministry ofPublic Management, Home Affairs, Posts and Telecommunications serves as a gateway for the
government as a whole ( http://www.e-gov.go.jp/ ).
• Office of Trade and Investment Ombudsman (OTO):  established in January 1982.  Deals with
complaints on specific regulations that are obstructing imports and investment in Japan.
2. Technical assistance and capacity building
17. Many developing countries rely on attracting investment to enable stable economic operation,
but while they understand that transparency needs to be secured as a key factor in attractinginvestment, they frequently lack the necessary resources and technical capacity.  One means of
rectifying this situation would be to pursue a technical assistance and capacity building programme
within the WTO framework that was linked to securing transparency.
1  It would be particularly
effective to engage in specific considerations that were linked to concrete methods for securing
transparency.  A number of programs are currently under consideration or implementation throughcooperation with international organizations, particularly UNCTAD, to promote technical assistance
                                                     
1 The same proposal has been made in a Korean submission (WT/WGTI/W/70 “A Benefit of Multilateral
Investment Rules: Enhanced Transparency”).WT/WGTI/W/112
Page 5
related to investment rules.  Japan would like to see WTO-based, bilateral and various other types of
programs being utilized to provide efficient technical assistance without unnecessary duplication.  WT/WGTI/W/112
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ANNEX I
PROBLEMS FACED BY JAPANESE ENTERPRISES
IN HOST COUNTRES
58.6
53.0
49.3
42.6
33.5
29.6
26.8
22.2
20.7
19.7
18.5
15.0
13.8
12.1
9.9
6.461.6
55.0
48.7
40.6
31.0
22.9
30.3
18.1
17.0
19.9
14.4
14.8
14.4
11.8
7.0
5.252.6
48.9
50.4
46.7
38.5
43.0
20.0
30.4
28.1
19.3
26.7
15.6
12.6
12.6
15.6
8.90 1 02 03 04 05 06 07 0
Non-transparency in investment-
related rules
Instability in investment-related
rules
Restriction on free transfer of
payments
Lack of investment-related rules
Discriminative treatment against
foreign investors
Restriction on the ratio of
stockholdings
Export requirement/Restriction on
sales in the host country
Restriction on investment in
certain sectors
Requirement to hire a given level
of nationals
Trade balancing
requirements/Foreign exchange
restriction
Requirement to establish a joint
venture w ith domestic
participation
Local content requirement
Req uirement to transfer
technology
Discriminative treatment on the
ground of nationality of an
enterprise
Nationality requirement for
executives 
Restriction on entry, stay and
w ork of key personnelThe Whole
Manufacturing
Non-manufacturingWT/WGTI/W/112
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ANNEX II
TRANSPARENCY PROVISIONS IN THE EXISTING AGREEMENTS
GATT GATS TBT TRIMs SCM TRIPS GPA NAFTA
II:9.1
II:11
V:6.1
V:8
II:9.2 V:1
V:6.2 VI:2
XV:2
II:5
II:9.3 1801
V:6.3 1803
X:1
Establishment of enquiry points III:4 X:1 1801
Domestic judical and complaints X:3 VI:2 XX 1805
Administrative procedures VI:3,4 1804
Confidential X:1 III:bis LXIV:4 XIX:4
*1 Provision of an annual basis statistics on the procuraments covered by the
GATT: General Agreement on Tariffs and
GATS: General Agreement on Trade i n
TBT: Agreement on Technical Barriers to
TRIMs: Agreement on Trade-Related Investment
SCM: Agreement on Subsidies and CountervailingTRIPS: Agreement on Trade-Related Aspects of Intellectual Propert
y
GPA: Agreement on GovernmentNAFTA: North American Free Trade1803
Responses to request for the provision of information III:4 VI:3 XXV:8,9 LXIII:3 XIX:2,3XXV:1 LXIII:2 XIX:5 *1
Notification and provision o f III:3XIX:1 1802 Publication of the related domestic X:1 III:1 LXIII:1
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