RESTRICTED  WORLD TRADE  
ORGANIZATION  GPA/W/247 
5 February 2003 
 (03-0769) 
Committee on Government Procurement Original:   English 
 
  
MODIFICATIONS TO THE APPENDICES TO THE AGREEMENT  
JAPAN’S NOTIFICATION RELATING TO NTT 
 
Communication from Japan
 
  
 
 With regard to the references made to Japan's notification relating to NTT in the minutes of 
the Committee meeting of 8 October 2002, as well  as in the annotated agenda for the Committee 
meeting of 6 February 2003, Japan wishes to report to the Committee the result of the consultations 
with the European Community.  Japa n deeply regrets that it is not able to bring to this Committee 
meeting the report of an agreement with the European Community, despite the efforts made during 
consultations over the past three years.  Japan thus r ealises that it shall be quite difficult to solve the 
matter bilaterally.  The following report will enable other Parties to better understand the matter at 
issue between Japan and the European Community, regarding interpretation of the current 
Article XXIV:6.  By submitting this communicatio n to the Committee, Japan reserves its right to 
solve the matter through all procedures possible under the Agreement on Government Procurement. 
 
Bilateral consultations 
  Since submission of the notification relati ng to NTT in September 1999, Japan has had a 
number of bilateral consultations with the repres entatives of the European Community in Geneva, 
Brussels and Tokyo.  After withdr awal of the objection to the same notification by the United States 
in October 2001, Japan intensified bilateral contacts with the European Community with a view to 
solving the matter as soon as possible.  Since October 2001 up until now, both delegations have conducted intensive consultations:  three times in Geneva and once in Tokyo.  In August 2002, Japan 
requested, by way of a letter from Ambassador Ha raguchi to EC Ambassador Trojan, that the 
European Community present its position in writing,  together with the reasons for maintaining its 
objection, should this be the case. 
 
 In October 2002, the European Community  replied, by way of a letter from 
Ambassador Trojan, that the EC maintained for the time  being its objection to Japan's notification.  As 
for the reasons for its objection, the European Comm unity raised the three issues:  shareholding, the 
NTT law and the market situation (particularly its  concerns on the independence of the telecom 
regulator in Japan and on the lack of dominant  carrier regulations over NTT Communications 
Corporation). 
  In December 2002, Japan presented its  positions on the issues addressed in 
Ambassador Trojan's letter and requested the Eu ropean Community to re view its position and to 
consider a way to withdraw its objection.  It also  called upon the European Community to present its 
final position by 25 January 2003 ( cf. details in the attached letter). 
 GPA/W/247 
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  In January 2003, both parties made additional efforts in order to explore ways for a mutually 
satisfactory solution.  However, a deal did not prove possible due to the gap in the views regarding the 
level of market liberalization that should be proved  by a Party wishing to withdraw an entity from its 
Appendix I.  In the end, both Parties recognized that neither could accept the position of the other.  On 
30 January 2003, Japan received a reply, by way of a letter from Mr. Carl, Director General for Trade, 
European Commission, that the EC was obliged for th e time being to maintain its objection, seeing as 
the concerns raised in its letter of October 2002 ha d not been satisfactorily addressed, despite the 
additional clarification provided by Japa n in its letter of December 2002. 
 Issues for consideration  
 
 Japan wishes to propose that the Committee look at the following issues in order to clarify 
and improve the procedures under the current Article XXIV:6: 
 
• an objecting Party should not prevent a proposed modification from becoming effective for 
reasons that are outside of the scope of the Agreement on Government Procurement; 
 
• an objecting Party should not utilize its position to link the withdrawal of its objection to a 
solution or to progress in other trade issues; 
 
• the Agreement on Government Procurement is no t a sector-specific agreement, but a general 
agreement on procurement.  All entities no tified under Article XXIV:6 should be treated 
equally under the Agreement and examined unde r equivalent criteria (e.g. legal oversight, 
ownership of shares, voting rights, appointment of the managing board, financial support, 
special or exclusive rights).  Therefore, an objecting Party should not place sector-specific 
requirements on any entity notified under Article XXIV:6, which are not equally applicable to 
entities in other sectors.  GPA/W/247 
 Page 3 
 
 
 ATTACHMENT 
 
MISSION PERMANENTE DU JAPON  
AUPRÈS DES ORGANISATIONS INTERNATIONALES 
Genève – Suisse 
NK/se/D.447 
 
Geneva 12th December 2002 
 
Dear Ambassador,  
 
 With regard to your letter dated 22 October 2002, concerning Japan's modification with 
respect to the NTT Corporation in Appendix I of  the Agreement on Government Procurement, I 
hereby transmit to you the points set out be low, upon instructions from my Government. 
 
 First of all, Japan deeply regrets that all th e written information and ex planations provided by 
Japan over the past three years have not yet been  deemed sufficient by the EC as proof that 
government control or influence over the NTT Co mmunications Corporation has been effectively 
eliminated.  As the EC is now the only Party object ing to the entry into force of Japan's modification 
since the withdrawal of the objections by the United States in October 2001 and by Canada in 
October 2002, Japan calls on the EC to expedite ex amination thereof, and to present its final position 
by 25 January 2003.  With a view to facilita ting the internal coordination in the European 
Commission and with the EU Member States, Japan attaches hereto its position regarding the issues 
addressed in the above EC letter.  
 Japan sincerely requests the EC to review its position and to consider a way to withdraw its 
objection.  For example, with a similar reserva tion in paragraph 2 of both the US and Canada's 
respective Communications (documents GPA/W/166 and GPA/W/213), the EC's withdrawal of 
objection in this case would not prejudge or prejudice its position on any other proposal for modification in Appendix I.  However, in the event of no reply, or of no change to the EC's position by the above data in January, Japan would be obli ged to report to the Committee in February 2003 
that the matter could not be solved bilaterally, desp ite the efforts made in consultations over the past 
three years, and Japan would seek other procedures for solving the matter; including those in 
accordance with provisions in paragraph 6 of Article XXIV of the Agr eement on Government 
Procurement.  
 I would be appreciated if this letter could be duly forwarded to your competent authorities at 
your earliest convenience. 
 
        Y o u r s  s i n c e r e l y ,  
 
 
       Shotaro OSHIMA 
     Ambassador Extraordinary and Plenipotentiary 
              Permanent Representative of Japan 
 
cc. Mr Jan Peter MOUT, Chairman of the Committee on Government Procurement  
H.E. Mr Carlo TROJAN 
Ambassador 
Permanent Representative of the EC 
37-39 rue de Vermont 
Case postale 195 
1211 GENEVA 20 GPA/W/247 
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JAPAN'S POSITION REGARDING THE ISSUES RAISED IN  
AMBASSADOR TROJAN'S LETTER (EC),  
DATED 22 OCTOBER 2002
1 
 
 
 1. Shareholding 
 As the Government of Japan (GOJ) has no shares in NTT Communications Corporation 
(hereinafter referred to as "NTT Communications "), it is not able to influence the company as a 
shareholder.  Even though the GOJ holds 46 per cent of shares in NTT Holding Company, which 
currently holds 100 per cent of the shares in NTT Communications, the GOJ (i.e. the Ministry of 
Finance) only owns shares in NTT Holding Company for the sake of maintaining part of them as state 
property.  The GOJ has neither exercised its shareholder's rights, nor has it been involved in the 
management of NTT Holding Company.  The GOJ is no t, therefore, in a position to exert control or to 
influence NTT Communications through its holding company.  In addition, NTT Holding Company can now dispose of the shares in NTT Communications  at will, without government approval after the 
last amendment to the NTT Law (effective as of 30 November 2001).  (In this context, Japan wishes 
to point out that in several EU member States
2, the government has more than 50 per cent of shares in 
major telecommunication companies, and that such companies are not subject to the Agreement on 
Government Procurement (GPA), since the EC has not offered those state-owned companies in its 
Appendix I of the Agreement.)  
2. NTT Law 
NTT Communications is a fully private company, established in accordance with the 
procedures under Japanese Commercial Law.  It is subject to the Telecommunication Business Law, which applies to all telecommunications companies.  As no provisions of the NTT Law apply to NTT Communications since its last amendment, the GOJ ha s no legal authority to control or influence the 
company's business decisions, including those on procurement. 
 
3. Market situation 
In the long distance/international call services  where NTT Communications provides its main 
services, there exist no laws or regulations to li mit market access and national treatment for those 
domestic and foreign companies wishing to enter su ch markets.  In fact, 35 licensed companies are 
currently providing long distance/international call se rvices in Japan.  Among them are 25 companies 
with substantial stock participation (more than 50 per cent) of foreign companies:  one Canadian 
company, six European companies (two British, on e French, one German, one  Irish and one Dutch), 
two Singaporean companies, 14 US companies, as well as two Hong Kong-Australian Joint enterprises.  In the long distance telecommunications market, the share of NTT Communications has 
fallen from 57.6 per cent (FY 1998) to 53.5 per cent (FY 2000).  Its market share for international 
calls is only 4.6 per cent (FY 2000).  In addition, the charges for long distance calls and international 
calls where NTT Communications provides its main services, have been decreasing since its 
establishment in 1999 ( cf. Chart 5, GPA/W/160, p. 6).  In view of the facts mentioned above, Japan is 
convinced that sufficient competition exists in these markets in Japan. 
                                                     
 
1 Regarding shareholding, the NTT Law and the market situation, Japan has submitted detailed 
information in its documents (GPA/W/104, GPA/W/104/Add.1, GPA/W/104/Add.2/Rev.1, GPA/W/107, GPA/W/108, GPA/W/160 and GPA/W/199). 
2 Austria, Belgium, Finland, France, Greece, Luxembourg and Sweden (according the data as of 
December 2000 in the 2001 OECD Communications Outlook).  GPA/W/247 
 Page 5 
 
 
  
4. Independent regulator and do minant carrier regulations 
As repeatedly stated by Japan since the EC first raised these issues in the bilateral 
consultations in May 2002, the issues of independen t regulator and dominant carrier regulations are 
not relevant to the requirement in  Article XXIV:6(b) of the GPA.  The purpose and scope of the GPA 
is to liberalize the government procurement market of  the scheduled procuring entities in each Party, 
while the issues raised by the EC relate to the domestic re gulations over the telecommunications 
market in Japan in general, and are clearly beyond the scope of the issues raised by Japan's 
notification (i.e. the GOJ's control or influence over NTT Communications).  Without any concrete 
stipulation regarding such regulations in the GPA, one can logically conclude that such rules are not 
incorporated in the GPA.  Therefore, Japan believe s that independent regulator and dominant carrier 
regulations are outside the scope of the GPA and Japa n is not obligated to take such measures under 
its notification made in accordance with Article XX IV:6 of the GPA.  In conclusion, Japan would like 
to stress that the GPA is not a sector-specific agre ement, but a general agreem ent on procurement.  In 
other words, all entities notified under Article XX IV:6 shall be treated equally under the GPA and 
examined under equivalent criteria (e.g. legal oversight, ownership of shares, voting rights, appointment of the managing board,  financial support, and special or exclusive rights).  Japan is, 
therefore, against any approach which would place such sector-specific requirements on any entity 
notified under Article XXIV:6 of the GPA, which are not equally applicable to entities in other 
sectors. 
 
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