RESTRICTEDWORLD TRADE
ORGANIZATIONG/SG/Q2/JPN/1
4 May 2001
(01-2289)
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
Questions Posed by the UNITED STATES
Regarding the Notifications of JAPAN1
The following communication, dated 1 May 2001, has been received from the Permanent
Mission of the United States.
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Japan has found critical circumstances to exist and imposed provisional relief in three
safeguard investigations pending completion of full investigations.  Such measures are governed by
Article 6 of the Safeguards Agreement.  Article 6 defines critical circumstances to exist when (a) thereis "clear evidence" that increased imports have caused or are threatening to cause serious injury, and
(b) where delay would cause damage which would be difficult to repair.  Article 6 permits a member
to apply a provisional measure for up to 200 days.  It also states that any such measure "should" take
the form of a tariff increase, to be refunded if the competent authorities subsequently do not make an
affirmative determination.  All three Japanese provisional measures are in the form of a tariff ratequota.
Reason for safeguards (food security?)
Minister Yatsu told the Yomiuri Shimbun that "some say invoking the measures is only a
domestic issue.  Companies’ development-import business is not something subject to government
regulation.  In the long term, however, it will impoverish domestic farmers.  It also poses problems in
terms of food security.  We hope the companies will improve their business principles and
philosophies."
• 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?
                                                     
1 G/SG/N/6/JPN/1 & Corr.1, G/SG/N/7/JPN/1, G/SG/N/11/JPN/1.G/SG/Q2/JPN/1
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Competent Authority
Japan’s notification defines its competent authorities as the Ministry of Finance, the Ministry
of Agriculture, Forestry and Fisheries, and the Ministry of Economy, Trade and Industry.
• Are all three of these entities the competent authorities for all three investigations?  If so, which
entity is actually conducting the investigation?  Are they conducting the investigation in tandem?
If so, please describe how they do so in practice.
Determination of Threat of Serious Injury
A. Welsh Onions• 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 not provide 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 profitab ility, are also part year data, and would be
significantly higher if presented on an annualized basis (assuming such data would not be
distorted by seasonal factors).
• Decline in production inconsistent with increase 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?
• 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, it seems
likely that other factors are at least partially responsible for any serious injury being sufferedby 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 competent authorities?  For example, were weather conditions
considered?
•  Factors affecting 1998 data.   Why did domestic production fall sharply in 1998, a year in
which imports increased by only a small fraction of the increase in production?  Why did
profitability increase sharply in that year?  To what extent is domestic production cyclical?
• Year 2000 profitability data.  Are year 2000 profitability data full year or part year data?
• 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?
The Mainichi Daily News on 25 April reports that distribution, packaging and wholesaling
and retailing costs account for more than 70 per cent of the retail price in Japan of domestically grown
naganegi (welsh onions).
• 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 an
important matter.G/SG/Q2/JPN/1
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According to Japan’s notification, the import share of welsh onions in 1996 was almost zero
(0.4 per cent).  From this extraordinarily low base, imports rose over 5 years to take 8.2 per cent of
market share in 2000.  Given the length of time it has taken imports to reach 8.2 per cent share of
Japan’s market, it strikes us that Japan’s producers have had a relatively long period already in whichto adjust to competition.
• If Japanese producers are having serious problems based on lower prices, it suggests that the
internal cost/pricing structure 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 capital
investment in Japan.
B. Shiitake Mushrooms
• Year 2000 data.   Are year 2000 data in the Annex tables full year or partial year data?
• 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 ofpreparation?
C. Tatami-Omote• 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 authorities 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?
• 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 thanincreased 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?
Remedy
• Who decided upon the form of the remedies?  One of the Ministries?  Which one?  Some
other entity?  Please identify.
• 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?
• How did Japan settle upon the in-quota quantities in the TRQs?G/SG/Q2/JPN/1
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• Your notification describes the over-quota tariff rates in terms of yen/kg.  What are the rates
in terms of per cent ad valorem?
• 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 time
to restructure their industries".  Whether we change the measures from temporary to
permanent ones depends on how they implement reforms."
• What "adjustment" or "restructuring"  does Japan have in mind over the short/medium term to
make its welsh onion, tatami reed and shiitake mushroom producers competitive or to assistthem 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?
The Secretary-General of the Japan Fair Trade Commission told a press conference recently
that "import restrictions, while allowed under the Safeguard mechanism of the WTO, could adversely
affect Japanese consumers as well as the domestic industry’s efforts to improve international
competitiveness and promote structural reform."
• Could the Japanese Government e xplain what steps the domestic industry is taking to improve
international competitiveness?
Critical Circumstances
A. Welsh Onion• The WTO Safeguards Agreement requires "clear evidence" that increased imports are causing or
threatening to cause serious injury 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?
• The notification states that "18 per cent of the producers responded that they will decrease or
discontinue their production of welsh 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 apparentfact with the existence of critical circumstances?
• 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 the basis for this
assertion, which appears to be merely argumentative?
• Also, the import data in Annex I indicates 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"?
B. Shiitake Mushrooms• In support of its critical circumstances finding for shiitake mushrooms, Japan cites little more
than the evidence that it claims demonstrates serious injury and causation.  How do theseG/SG/Q2/JPN/1
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elements support a finding that delay in imposing relief would cause damage which it would
be difficult to repair?
C. Tatami-Omote
• 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?
• 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 resumeproduction even though prices wi ll rise in the future .  Given the results of this survey,
which indicates that any damage that has already occurred is irreparable, how does this
support the conclusion that a delay in taking action would cause damage that would be
difficult to repair?
Voluntary restraints
Press reports indicate that Japan is continuing to discuss with China possible voluntary export
restraints.
• 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?
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