Japan WT/TPR/S/142 
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
(1) TRADE POLICY OBJECTIVES  
1. Japan's trade policy has remained largely unchanged since its previous Trade Policy Review, 
in 2002;  its overall aim continues to be to ensure long-term prosperity and growth by promoting 
business activities in Japan and at an internationa l level.  In this regard, Japan has placed high 
emphasis on supporting the multilateral trading syst em and has been participating actively in the 
WTO negotiations.  With a strong preference for multila teral trade liberalization, Japan grants at least 
MFN treatment to all countries except Andorra, East  Timor, Lebanon, Republic of Equatorial Guinea, 
Eritrea, and North Korea. 
2. Concurrently, Japan has been intensifying its pu rsuit of bilateral/regional FTAs with some of 
its trading partners, not just in ar eas covered by existing WTO Agreements, but also in areas like trade 
facilitation, investment, competition policy, and improvement of business environment.  The 
authorities consider that regional and bilatera l trade arrangements complement the multilateral 
system, and are useful tools for market liberalization and structural reform.  In January 2002, Japan 
signed its first bilateral free-trade agreement, th e Agreement between Japan and the Republic of 
Singapore for a New-Age Economic Partnership (JSEPA), which entered into force in November 2002.  On 17 September 2004, Japan signed the Agreement for the Strengthening of the Economic Partnership with Mexico, and is curren tly negotiating free-trade agreements with the 
Republic of Korea, Thailand, the Philippines, and Malaysia, as well as consulting with the ASEAN as 
a whole.  Japan also supports the "open region alism" approach of the Asia-Pacific Economic 
Cooperation (APEC) forum, and participates in various other regional trade fora, such as the Asia-
Europe meeting (ASEM) and the ASEAN+ 3. 
3. Japan grants preferential treatme nt to products from certain developing and least developed 
countries under the Generalized System of Preference (GSP) scheme.  The current GSP scheme, 
which is valid until 2011, has been extended to 140 countries and 15 territories;  47 least developed 
countries qualify for further preferential treatment (e.g. tariff-free and quota-free treatment).  The 
main beneficiaries of Japan's GSP include China, Thailand, Indonesia, Malaysia, and the Philippines.  
(2) T
RADE POLICY FORMULATION AND EVALUATION  
(i) Trade policy formulation and implementation 
4. There have been no substantial changes in Japan's trade-related legal and regulatory 
framework since its previous Review in 2002 (T able II.1).  Trade-related issues remain the 
responsibilities of a number of ministries including the Ministry of Foreign Affairs (MOFA) and the 
Ministry of Economy, Trade, and Industry (METI).  Other ministries and agencies with responsibility 
for sectoral issues are also involved in  trade policy formulation and implementation.1  The overall 
coordination of trade policies, including ensuring consistency, remains the final responsibility of the 
Cabinet, with input from advisory councils such as the Council on Economic and Fiscal Policy.  On 
1 April 2004,  the Cabinet established the Council for the Promotion of Regulatory Reform (CPRR), 
which replaced the Council for Regulatory Reform (CRR), whose mandate expired on 
31 March 2004.2  Trade and other policy issues are also debated in various Committees, including 
                                                      
1 See WTO (2003), Chapter II(2)(i). 
2 The CPRR has been designated as a central body that promotes regulatory reform, including the 
facilitation of private participation in sectors currently operated by the state, improvement of consumer welfare 
and revitalization of the economy.  The CPRR is mandated to monitor the implementation of the Three-Year WT/TPR/S/142 Trade Policy Review 
Page 14 
  
standing committees in the Diet and the Japan Investment Council (JIC).3  In March 2003, the JIC 
announced "the Program for the Promotion of Fo reign Direct Investment into Japan", which 
recommended that the Government implement 74 measures to reduce impediments to inward FDI.  
These measures included:  the dissemination of information on investment opportunities in Japan, improving Japan’s corporate governance and labour market, creating a favourable living environment 
in Japan, reviewing administrative procedures, and enlarging the role of local governments in 
attracting FDI.  The Government is currently studying ways to revise tax treatment of mergers and 
acquisitions and plans to submit a bill to the Diet in 2005 (Chapter III(3)(ii)). 
Table II.1 
Japan's major trade-related laws and regulations 
 Most recent amendment 
Foreign trade and exchange restrictions  
 Foreign Exchange and Foreign Trade Law (1949 Law No. 228)  2004 
 Export and Import Transaction Law (1952 Law No. 299)  1997 
 Foreign Exchange Order (1980 Order No. 260)  2003 
 Cabinet Order on Inward Direct Investment (1980 Order No. 261)  2002 
 Export Trade Control Order (1949 Order No. 378)  1999 
 Import Trade Control Order (1949 Order No. 414)  2000 
Customs- and tariff-related regulations  
 Customs Law (1954 Law No. 61)  2004 
 Customs Tariff Law (1910 Law No. 54)  2004 
 Temporary Tariff Measures Law (1960 Law No. 36)  2004 
 Cabinet Order Relating to Countervailing Duties (1994 Order No. 415)  2004 
 Cabinet Order Relating to Anti-Dumping Duties (1994 Order No. 416)  2004 
 Cabinet Order Relating to Emergency Duties (1994 Order No. 417)  2002 
 Cabinet Order Relating to Retaliatory Duties (1994 Order No. 418)  2000 
 Cabinet Order on Tariff Quotas (1961 Order No. 153)  2004 
Trade promotion  
 International Trade Insurance Law (1993 Law No. 36)  2004 
 Law on Extraordinary Measures for the Promotion of Imports and the Facilitation of Foreign Direct 
Investment in Japan (1992 Law No. 22)  2004 
Services and energy   
 Construction Business Law (1949 Law No. 100)  1996 
 Banking Law (1981 Law No. 59)  2001 
 Insurance Business Law (1995 Law No. 105)  2003 
 Securities and Exchange Law (1948 Law No. 25)  2004 
 Telecommunications Business Law (1984 Law No. 86)  2003 
 Law Concerning the Measures by Large-Scale Retail Stores for Preservation of Living 
Environment (1998 Law No. 91)  
 Employee's Pension Insurance Law (1954 Law No. 115)  
 Civil Aeronautics Law (1952 Law No. 231)  1999 
 Marine Transportation Law (1949 Law No. 187)  2002 
Table II.1(cont'd) 
                                                                                                                                                                     
Program for the Promotion of Regulatory Reform and can require the heads of relevant governmental 
organizations to submit materials, provide explanations, and extend cooperation to the CPRR. 
3 The JIC, established by the Cabinet in July 1994 for the purpose of promoting FDI into Japan, is 
chaired by the Prime Minister;  the Ministers of State for Financial Services and for Economic and Fiscal Policy 
serve as vice chairpersons. Japan WT/TPR/S/142 
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 Most recent amendment 
 Special Measures Law Concerning the Handling of Legal Business by Foreign Lawyers (1986) 
Law No. 66)  2003 
 Certified Public Accountants Law (1948 Law No. 103)  2003 
 Certified Tax Accountant Law (1951 Law No. 237)  1993 
 Law for Improvement of International Tourist Hotels (1949 Law No. 279)  1999 
 Travel Agency Law (1952 Law No. 239)  1999 
 Electricity Utilities Industry Law (1964 Law No. 170)  2003 
 Gas Utility Industry Law (1954 Law No. 51)  2003 
 Petroleum Reserve Law (1975 Law No. 96)  2003 
 Law on the Quality Control of Gasoline and Other Fuels (1976 Law No. 88)  2000 
Standards and technical regulations  
 Industrial Standardization Law (1949 Law No. 185)  2000 
 Law Concerning Standardization and Proper Labelling of Agricultural and Forestry Products 
(JAS Law) (1950 Law No. 175)  1999 
 Pharmaceutical Affairs Law (1960 Law No. 145)  2002 
 Food Sanitation Law (1947 Law No. 233)  
 Quarantine Law (1951 Law No. 201)  1998 
 Plant Protection Law (1950 Law No. 151)  1996 
 Domestic Animal Infectious Diseases Control Law (1951 Law No. 166)  1997 
 Construction Business Law (1949 Law No. 100)  2004 
 Building Standard Law (1950 Law No. 201)  
 Electrical Appliance and Material Control Law (1961 Law No. 234)  
 Consumer Product Safety Law (1973 Law No. 31)  1996 
 High Pressure Gas Safety Law (1996 Law No. 14)  2004 
Intellectual property rights  
 Patent Law (1959 Law No. 121)  2004 
 Customs Tariff Law (1910 Law No. 54)  2004 
 Act Against Unjustifiable Premiums and Misleading Representations (1962 Law No. 134)  1993 
 Unfair Competition Prevention Law (1934 Law No. 47)  2004 
 Utility Model Law (1959 Law No. 123)  2004 
 Design Law (1959 Law No. 125)  2003 
 Trademark Law (1959 Law No. 127)  2003 
 Copyright Law (1970 Law No. 48)  2004 
 Civil Code (1896 Law No. 89)  2004 
 Penal Code (1907 Law No. 45)  2003 
Agriculture  
 The Basic Law on Food, Agriculture and Rural Areas (1999 Law No. 106)  
 Manufacturing Milk Producer Compensation Temporary Law (1965 Law No. 112)  2002 
 Cocoon and Raw Silk Price Stabilization Law (1951 Law No. 310)  2002 
Others  
 Law Concerning the Organization of Small and Medium Enterprises Organizations 
(1957 Law No. 185)  2002 
 Administrative Procedure Law (1993 Law No. 88)  2003 
 Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade 
(Anti-Monopoly Act) (1947 Law No. 54)  1999 
Source: Information provided by the Japanese authorities.  WT/TPR/S/142 Trade Policy Review 
Page 16 
  
(ii) Trade policy evaluation 
5. In addition to the independent Board of Audit, the Government Policy Evaluations Act 
(GPEA), enacted, in April 2002, requires the Cabinet Office and Ministries to evaluate their own 
policies before and after implementation and to publ ish the results of their evaluations.  As well as 
these self-evaluations, the GPEA obliges the Minist ry of Internal Affairs and Communications (MIC)4 
to undertake an independent assessments of the policies implemented by other Ministries (Chart II.1).  
Furthermore, the Commission on Policy Evaluation and Evaluation of Incorporated Administrative 
Agencies, which consists of independent experts, was established to ensure that the MIC’s policy 
evaluations are conducted in a "fair and neutral" manner.5  The operation of the GPEA is to be 
reviewed by the Government after three years. 
Chart II.1
Policy evaluation system in Japan
MIC (Administrative Evaluation Bureau)
Promotion of the policy evaluation system (as a ministry responsible for the system)
                  Implementation of evaluations (as the specialized evaluation organization)
                  (1)  Coherence/comprehensiveness-ensuring evaluation
                  (2)  Activitie s to ensure objectivity in policy evaluationsReport
Cabinet Office and MinistriesDiet
Policy Implementation
(DO)Investigation and deliberation
Source :   Information provided by the Japanese authorities.Commission on Policy Evaluation 
and Evaluation of Incorporated 
Administrative AgenciesPrime Ministerial
Request for advice Submission of opinions
Citizens  Publication
Policy management cyclePlanning
(PLAN)Evaluation 
(SEE)Opinions based on 
evaluation resultsEvaluation documents Liaison/coordination
  Publication
 
 
                                                      
4 On 10 September 2004, English name of the Ministry of Public Management, Home Affairs, Posts 
and Telecommunication (MPHPT) was changed to the Ministry of Internal Affairs and Communication (MIC). 
5MIC (2002). Japan WT/TPR/S/142 
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(3) TRADE AGREEMENT AND ARRANGEMENTS  
(i) WTO 
(a) Introduction 
6. As a strong supporter of the multilateral trading system, Japan has been participating actively 
in the WTO, including in the Doha Development Age nda (DDA).  In its statement at the Ministerial 
Conference in Cancún in September 2003, Japan expressed its belief that the expansion of trade had 
been the principal driving force behind the rapid growth of the world economy and that the WTO ensured that the benefits of trade liberalization would be shared by all;  it also called for negotiations 
to be launched on the "Sin gapore issues", such as trade facilitati on, as it believed that the WTO would 
be an appropriate forum to develop global rules on such issues.
6  Japan also seeks to clarify and 
improve rules on trade remedies, particularly anti-dumping, in order to complement trade 
liberalization and safeguard the achievements of pr evious rounds of trade negotiations;  accordingly, 
together with a number of other WTO members, it has submitted several proposals on clarifying and 
improving the rules on anti-dumping in the Negotiating Group on Rules.  In the agriculture 
negotiations, Japan aims to establish rules, based on the Doha mandate, what would enable "the 
coexistence of various type of agriculture" and take into account "non-trade concerns", such as food security, rural development, and environment prot ection.  In the non-agriculture market-access 
negotiations, Japan has supported substantial tariff re duction and market access improvements.  In the 
negotiations on services, Japan made efforts to fa cilitate market access negotiations and to improve 
the disciplines on domestic regulation under the GATS. 
(b) Notification 
7. Like all members of the WTO, Japan is require d to notify its laws and measures under various 
WTO Agreements.  The status of selected notifications as of July 2004 is shown in Table AII.1. 
(c) Disputes 
8. Japan's use of the WTO Dispute Settlement Mechanism has increased over the years.  Since 
its last Review, Japan has been involved in one dispute as a respondent and four cases as a 
complainant (Table AII.2).  In addition, Japan pa rticipated as third party in 23 dispute cases. 
(ii) Regional agreements 
(a) Asia-Pacific Economic Cooperation (APEC)  
9. In keeping with its policy of supporting multilat eral trade and investment liberalization, Japan 
is a strong supporter of APEC's "open regionalism" goals.  The Tenth APEC Leaders' Meeting, held 
in Los Cabos, Mexico in October 2002, reaffirmed the Bogor goals of free and open trade and 
investment and agreed to support the new round of talks at the WTO.
7  The meeting recognized the 
importance of structural reform , including further liberalization and facilitation of trade and 
investment, in the APEC region;  it also endors ed an APEC Trade Facilita tion Action Plan (TFAP), 
which includes a number of actions and measur es in four key areas, i.e., movement of goods, 
standards, business mobility, and e-commerce. 
                                                      
6 WTO document WT/MIN(03)/ST/23, 11 September 2003. 
7 APEC (2002). WT/TPR/S/142 Trade Policy Review 
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10. At the Eleventh APEC Leaders' Meeting, he ld in Bangkok, Thailand in October 2003, 
Ministers agreed to re-energize the negotiating process in the Doha Development Agenda (DDA), 
recognizing that flexibility and political will were ur gently needed to move the negotiations toward a 
successful conclusion.  Leaders also agreed to continue APEC’s work on WTO capacity- and confidence-building, in areas such as structural impediments to trade in goods and services, training on competition policy and deregulation, corporate gov ernance and insolvency systems, corporate debt 
restructuring, and strengthening legal infrastructure  related to economic ac tivities, where APEC could 
best add value.  Japan and Canada are the current co-convenors of the WTO Capacity Building group, 
which reviews WTO-related capacity-building activiti es in APEC.  Ministers of APEC members also 
expressed determination to accelerate structural reform in their economies in order to ensure sustainable growth and development in the Asia-P acific region, and adopted an APEC Structural 
Reform Action Plan as a guiding programme for the APEC Structural Reform Initiative.
8 
11. In addition, APEC economies aim to reduce business transaction costs by 5% by 2006.  Since 
1 April 2003, Japan has implemented the APEC Business Travel Card (ABTC) scheme, in which holders of the APEC Business Travel Card are gran ted streamlined procedures for entry and departure 
from participating economies.
9 
(b) ASEM 
12. In September 2002, the fourth ASEM Leaders meeting was held in Copenhagen, Denmark, 
where the leaders agreed to set up an action-orient ed taskforce with a view to achieving a closer 
ASEM economic partnership.10  The taskforce consists of ten Asian and seven European experts;  a 
study on three areas, trade, investment, and finan ce was apparently conducted by these experts.  The 
taskforce is expected to submit its final report to the fifth ASEM Leaders meeting in 2004.  Japan, 
together with Viet Nam, was appointed as an Asian ASEM coordinator for the fifth meeting. 
(c) Japan and ASEAN 
13. Although not a member of the Association of South-East Asian Nations (ASEAN), Japan, 
along with China and the Republic of Korea holds regular meetings with ASEAN under the 
ASEAN+3 framework of cooperation .  High level meetings are held a nnually;  the sixth and seventh 
ASEAN+3 summits were held in November 2002 and November 2003. 
14. On October 2003, Japan and the ASEAN signed a "Framework for a Japan–ASEAN 
Comprehensive Economic Partnership (CEP)".  In this connection, an ASEAN–Japan Committee on Comprehensive Economic Partnership (AJCCEP) was established in November 2003 to carry out the 
work set out in the Framework.  Japan and ASEAN have started consultations on the liberalization 
and facilitation of trade in goods, trade in services and investment since the beginning of 2004;  they 
expect the implementation of measures for the realization of Japan–ASEAN CEP, including elements 
of a possible free-trade area, to be completed by 2012.
11 
                                                      
8APEC (2003b). 
9 An ABTC is issued, in principle, to a passport holder of a participating economy, who is a business 
traveller (conducting trade/investment activities) in the region. 
10 The first Asia-Europe Meeting (ASEM) was held in March 1996, with ten Asian countries, including 
Japan, China, the Republic of Korea, and seven other ASEAN countries, the 15 EU member states and the 
European Commission.  The ASEM aims to create a new Asia-Europe partnership to build greater 
understanding and strengthen dialogue between the two regions.  
11 MOFA (2003f). Japan WT/TPR/S/142 
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(d) Others 
15. Japan has also carried out a trilateral cooperati on with China and the Republic of Korea, in 
various areas including trade and investment, information and communication technology industries, 
environmental protection, and fina ncial cooperation. The leaders of the three countries have held 
regular informal meetings since 1999.  In the Joint Declaration on the Promotion of Tripartite 
Cooperation, signed on 7 October 2003, they agreed to make joint efforts to push forward the DDA 
negotiations with a view to improving market acce ss and strengthening the rules on anti-dumping.  In 
addition, they agreed to strengthen dialogue and cooperation on trade facilitation among their customs 
and transport authorities and to continue exchange s and cooperation between their quality supervision, 
inspection, and quarantine authorities through existing channels. 
(iii) Bilateral agreements 
(a) Japan–U.S. bilateral relationship 
16. Japan and the United States have continued their dialogue under the Japan–U.S. Economic 
Partnership for Growth, which was established in June 2001.  The Partnership aims to "promote 
sustainable growth by addressing issues such as sound macroeconomic policies, structural and 
regulatory reform, financial and corporate restructurin g, foreign direct investment and open markets";  
the Partnership also provides a structure for coope ration and engagement on bilateral, regional, and 
global economic and trade issues. 
17. No other bilateral arrangement or initiative between Japan and the United States has been 
launched since 2002.  The Partnership also provides fora for trade cooperation, namely, the U.S.–Japan Subcabinet Economic Dialogue, the Private Sector/Government Commission, the Regulatory 
Reform and Competition Policy Initiative, the Inve stment Initiative, the Trade Forum, and the 
Financial Dialogue.  The U.S.–Japan regulatory re form and competition policy initiative has provided 
opportunities for officials of the two countries to discuss reforms in key areas, including 
telecommunication, information technology, en ergy, medical devices and pharmaceuticals, 
competition policy, transparency and other gove rnment practices (including special zones for 
structural reform), legal system reform, commercial  law revision, distribution, consular affairs, and 
trade and investment-related measures.
12  Under the Investment Initiative, Japan and the United States 
have  addressed the structure and operation of corporation, corporate governance, corporate 
transparency, bankruptcy, labour mobility, and land market so as to the improve the environment for 
foreign investment.  The progress made under this in itiative is reported annually to the leaders of the 
two countries. 
18. On 30 March 2004, the Japan–U.S. New Tax Treaty entered into force;  the treaty was applied 
to withholding  tax on 1 July 2004, and is to be applied to other taxes on 1 January 2005.  The treaty 
exempts from taxation dividends earned by U.S./J apan subsidiaries in which their Japanese/U.S. 
parent firm has a stake of more than 50%, interest paid to financial institutions, and royalties.  On 
19 February 2004, Japan signed the Japan–U.S. Soci al Security Agreement.  This agreement is aimed 
at preventing the double payment of pensions and health insurance premiums as well as adding up the 
periods for which a person has paid social security  contributions in both countries in order for the 
person to be entitled to pensions in one or both countries.13 
                                                      
12 MOFA (2004e). 
13 MOFA (2004c). WT/TPR/S/142 Trade Policy Review 
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(b) Japan–European Union bilateral relationship 
19. Since its previous Review, Japan has continue d to pursue bilateral cooperation with the 
European Union.  At the Thirteen Summit held in  June 2004, three papers were issued:  "the Co-
operation Framework for Promotion of Japan-EU Two Way Investment," "Japan-EU Joint Initiative 
for the Enforcement of Intellectual Property Rights in Asia," and "Joint Statement on Cooperation on 
Information and Communication Technology (ICT)".  These papers describe actions for strengthening 
the strategic economic partnershi p between Japan and the EU.  The Co-operation Framework for the 
Promotion of Two-Way Investment addresses key issues such as regulatory transparency, standards 
and conformity assessment, movement of persons across national borders, and conditions for foreign 
residents.14  Both parties are also to promote the protection and encourage the enforcement of 
intellectual property rights. 
20. No bilateral arrangement between Japan and the EU has been launched since 2002, except for 
the agreement concerning cooperation on anti-co mpetitive activities, which was concluded in 
July 2003, and entered into force  in August 2003. 
(c) Japan–Singapore Agreement fo r an Economic Partnership 
21. In January 2002, the Prime Ministers of Japan and Singapore signed the "Agreement between 
Japan and the Republic of Singapore for a New-Age Economic Partnership (JSEPA)".  The agreement, which entered into force on 30 Novemb er 2002, is aimed at strengthening the economic 
relationship between the two countries in a wide range of areas, including the liberalization and 
facilitation of trade and investment, financial serv ices, information and communications technology, 
science and technology, human resources developmen t, small and medium enterprises, broadcasting, 
and tourism.
15  According to data provided by the auth orities, more than 98% of trade between the 
two countries has been covered by the JSEPA and approximately 94% of Singapore's exports entered 
into Japan duty free since the agreement entered into  force.  At the ministerial review meeting on 
JSEPA held in December 2003, the Ministers of Fo reign Affairs and of Trade of the two countries 
agreed that the JSEPA had laid a foundation for fi rmer economic linkage;  they considered that the 
JSEPA would create new opportunities for business,  promote stability and predictability for business 
transaction, and enhance the attractiveness and vibrancy of the two markets. 
(d) Japan–Mexico bilateral relationship 
22. In June 2001, Japan and Mexico established a "Joint Study Group on the Strengthening of 
Bilateral Economic Relations."  The final report of the joint study, published in July 2002, suggested that the two governments start working on an agreement to strengthen their bilateral economic 
partnership.  Subsequently, negotiations on an  economic partnership agreement (which involves 
preferential trade arrangements) began in Novemb er 2002, and in March 2004, the two countries 
reached agreement on its major elements.  On 17  September 2004,  Japan and Mexico signed the 
Agreement for the Strengthening of the Economic Partnership. 
(e) Japan–Malaysia bilateral relationship 
23. In December 2002, Japan and Malaysia agreed  to work towards the establishment of a 
free-trade agreement between the two countries.  In May 2003, a working group on Japan–Malaysia 
Economic Partnership was established, and meetings of a joint study group were convened in 
September and November 2003 with a view to conduc ting studies on a wide range of issues, including 
                                                     
 
14 MOFA (2004d).  
15 WTO (2003), Chapter II(iii)(c). Japan WT/TPR/S/142 
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liberalization and facilitation of trade in goods a nd services, investment and cooperation in various 
areas.  In January 2004, Japan an d Malaysia started their first formal negotiations for the possible 
conclusion of the Japan–Malaysia Economic Partnership Agreement.  The fourth round of 
negotiations was held in July 2004. 
(f) Japan–Philippines bilateral relationship 
24. In October 2002, Japan and the Philippines agreed to establish a working group to study the 
possibility of forming a "Japan–Philippines Economic Partnership Agreement";  the agreement was envisaged to cover trade in goods and services, investment, technical cooperation, and capacity 
building between the two countries.  In February 2004, the two governments started their first formal 
negotiations.  The third round of ne gotiations was held in July 2004. 
(g) Japan–Korea bilateral relationship 
25. In March 2002, Japan and Korea agreed to launch a joint study group to explore the 
possibility of establishing a "Japan–Korea Free Trade Agreement".  A report by the group was 
published in October 2003;  it contained a study on  possible bilateral cooperation in various areas 
such as liberalization and facilitation of trad e, and cooperation in science and technology.
16  In 
November 2003, the two countries decided to start negotiations an "economic partnership agreement" (which involve preferential trade arrangements) w ith a target of finishing the substance of the 
negotiations in 2005.  The first round of negotia tions was held in December 2003 and three further 
rounds were held in 2004. 
(h) Japan–Thailand bila teral relationship 
26. Japan and Thailand held working group meetings between September 2002 and May 2003 
and three task force meetings between July and November 2003 concerning the possible formulation of a "Japan–Thailand Economic Partnership Agreement (JTEPA)".  It is envisa ged that the agreement 
will cover trade in goods and services, investme nt, and cooperation in various areas such as 
information and communication technology.  The first formal negotiations began in February 2004.  The fourth round of the negotiation was held in September 2004. 
(i) Other bilateral arrangements 
27. Japan and China held the first meeting of a Japan–China Economic Partnership Consultation, 
at deputy ministerial level, in Beijing on 15 October 2002;  a second meeting was held in Tokyo on 
31 October 2003.  Follow-up meetings, at deputy director general level, were held in Beijing on 
11 March 2004 and in Tokyo on 28 June 2004.  The Consultation aims to identify bilateral economic 
issues affecting the two countries at an early stage and to prevent disputes between them, as well as to 
strengthen bilateral economic rela tions.  Intellectual property rights (including damages resulting from 
counterfeit goods), difficulties related to invest ment in China, anti-dumping measures adopted by 
China, pesticide residue on agricultural products  from China, and Japan–China cooperation in the 
international economy were also  discussed in the meetings  
28. The Prime Ministers of Japan and Australia signed an Australia–Japan Trade and Economic 
Framework in July 2003 to explore options for deeper bilateral economic linkages.  The Framework is 
aimed at working towards the liberalization of trade and investment, through various avenues, including a joint study to examine the costs a nd benefits of the bala nced and comprehensive 
liberalization of trade in goods and services and investment between the two countries. 
                                                     
 
16 MOFA (2003c). WT/TPR/S/142 Trade Policy Review 
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29. Japan considers a bilateral free-trade agreement wi th Chile as a medium- to long-term issue.  
In February 2003, the two countries decided to establish a Japan-Ch ile Bilateral Economic 
Consultation to exchange views on various economic matters, such as trade and investment, with a 
view to strengthening their economic ties.  The first meeting was held in Tokyo on 
18 November 2003, and the second in Santiago on 13 July 2004. 
30. Japan participates in a number of regional in itiatives, including cooperation in metrology and 
measurement standards through the Asia Pacific Metrology Programme and the Asia Pacific Legal Metrology Forum;  it also participates in the Asia Pacific Laboratory Accreditation Cooperation (APLAC) with a view to cooperating in the harm onization of laboratory accreditation practices. 
31. On 22 March 2004, Japan and Canada held Joint Economic Committee (JEC) meetings at 
deputy ministerial level to discuss their bilateral economic relationship.  Areas for discussion included 
further promotion of bilateral tr ade and investment, regulatory reform, and partnership between the 
two countries at multilateral fora, such as the WTO and APEC.  They also exchanged views on their 
respective free-trade agreement policies and their impact on Asian-Pacific region.  Issue-specific 
consultations have also been held on, for example, telecommunication, tourism, finances, science and 
technology, and standards. 
(iv) Preferential treatment 
32. Japan's Generalized System of Preferences (GSP) scheme grants preferential tariff treatment 
to certain developing countries under the Temporary Tariff Measures Law.  The Government has the 
authority to unilaterally designate, withdraw, suspen d, and limit beneficiaries or products that receive 
preferential treatment under the GSP scheme.
17  In 2001, Japan extended its GSP scheme to 
31 March 2011 and introduced various measures, such as expanding the product coverage of tariff-free and quota-free treatment for goods originating in the LDCs.  As a result, all textile and clothing 
products from LDCs are duty free and quota free. 
33. In April 2003, Japan added 118 agricultural products at the HS nine-digit level to its GSP 
preferential tariff.  As a result, the current GSP scheme grants preferential tariff treatment to 
140 developing countries and 15 territories for 339 agricultural and fishery products at the HS nine-digit level.
18  The preferences are granted on almost all industrial products, with the exception of 
118 items.19   
34. The depth of tariff cuts varies according to the product;  for sensitive industrial products, 
there are 78 product groups (1,264 items at the HS nine-digit level) to which various preferential rates 
(0%, 20%, 40%, 60%, 80% of MFN rates) apply up to specified ceilings.  The ceilings are open for 
utilization by all beneficiaries.  However, preferen tial treatment is suspended on a monthly basis when 
ceilings are reached.  If pr eferential imports from one beneficiary ex ceed one fifth of the total value or 
volume of the ceiling, the preferential treatment fo r that beneficiary is suspended.  Preferential 
treatment under the GSP scheme is granted on the co ndition that goods fulfil Japan's GSP rules of 
origin.  The administration of ceilings and maxi mum country volumes are managed on a first come 
first served basis. 
                                                      
17 In order to qualify for preferential treatment unde r the GSP, the country or territory must:  be a 
developing economy;  have its own tariff and trade sy stem;  request preferential tariff treatment;  and be 
prescribed by a Cabinet Order as a country or territory benefiting from GSP treatment. 
18 MOFA (2003e). 
19 MOFA (2003b). Japan WT/TPR/S/142 
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35. In April 2003, the number of LDCs' agricultura l and fishery products eligible for duty-free 
and quota-free treatment was increased to around 500 items (from around 300 items previously);  the 
additional items included, for example,  prawns and frozen fish fillets.20  As a result, duty-free and 
quota-free coverage for LDCs is expected to rise fro m 80% to over 90% in terms of total import value 
from LDCs. 
36. Japan removed Slovenia from its list of GSP beneficiaries in 2003.21  As a result of their 
accession to the European Union on 1 May 2004, ei ght countries were also excluded from the scope 
of application of the GSP scheme.22  The main beneficiary of GSP is China, unchanged since the 
previous Review (Table II.2). 
Table II.2 
GSP shares for the ten largest beneficiaries 
(Million yen) 
Beneficiaries Import value of 
preferential treatment Share (%) 
People's Republic of China 883,591 56.1 
Thailand 138,420 8.8 
Indonesia 132,911 8.4 
Malaysia 104,288 6.6 
Philippines 88,890 5.6 
Viet Nam 30,279 1.9 
India 23,840 1.5 
Brazil 19,999 1.3 
Chile 16,064 1.0 
Morocco 13,119 0.8 
World 1,574,425 100.0 
Source:  Information provided by the Japanese authorities.  
                                                      
20 For imports of industrial products from LDCs, 99% of items receive duty-free and quota-free 
treatment. 
21 WTO documents WT/COMTD/N/2/Add.12, 12 May 2003, and WT/COMTD/LDC/M/35, 
30 January 2004. 
22 WTO document WT/COMTD/N/2/Add.13, 1 June 2004.