WORLD TRADE  
ORGANIZATION   
WT/REG235/2 
16 June 2011  
 
(11-2965) 
Committee on Regional Trade Agreements Original:   English 
  
 
ECONOMIC PARTNERSHIP AGREEMEN T BETWEEN JAPAN AND THAILAND 
(GOODS AND SERVICES) 
 
Questions and Replies 
 
 
 The following communication, dated 10 June 2011,  is being circulated at the request of the 
delegations of Japan and Thailand.  
_______________ 
 
  This document reproduces the questions addressed to the Parties and the responses submitted.  
Questions from the Delegation of Australia 
Trade in Goods 
 
1. How do the Parties view the Agreement outcomes in relation to obligations under 
GATT Article XXIV, including the elimination of duties and other restrictive regulations of 
commerce on substantially all the trade within a re asonable length of time (ten years)?  We note 
that: 
 - 870 tariff lines on the Japanese side are not subject to eventual tariff elimination, 
 and 149 on the Thai side.  
  - only 64% of Japan's agricultural product tariff lines will be tariff-free for 
 Thai products at the end of the implementation period.  
  The Parties to the Agreement believe that the coverage of the Agreem ent between the Parties 
fulfils the "substantially all trade" requirement under GATT Article XXIV. 
 
 "Substantially all trade" does not amount to a ll trade.  The criterion refers to overall trade 
rather than to either imports or exports, and is not necessarily equal to the coverage of specific sectors 
or products. 
  Moreover, as the liberalization undertaken by the Parties in the Agreement covers 
substantially all the trade carried out between the Part ies, we are of the view that the coverage of the 
Agreement is fully consistent with our WTO obligations. 
 
   WT/REG235/2 
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  2. The average final tariff on dutiable agricultu ral products ranges from 14.1% to 22.5% 
in Japan and from 12.8% to 52.8% in Thailand.  Are there any provisions to reduce these tariffs after the implementation period? 
 Article 26 of the Agreement stipulates that the Parties shall undertake a general review of the 
provisions of Chapter 2 (Trade in Goods), includi ng a general review of the Schedules in Annex I 
including the originating goods that are excluded from any commitment of elimination or reduction of 
customs duties and commitment of negotiation, in th e tenth calendar year following the calendar year 
in which this Agreement enters into force, or earlie r only if agreed between the Parties.  In addition, 
the Notes for Schedule of Japan in Annex I stipulates  that the Parties negotiate, in the fifth year, on 
issues such as improving market acc ess conditions on specific products. 
 
3. Both Japan and Thailand will retain duties on agricultural tariff lines at the end of the 
implementation period that combines both ad valorem  and specific duties.  Are there any 
provisions to simplify these tariffs?  
 No, there are no such provisions. 
 
4. How were the average final tariffs (dutiable) in HS sections I to IV in Table III.1A and 
III.3 calculated?  What price data/series was used?  Was this a period of high or low prices for 
those commodities that retain specific duties? 
 The final tariff rates were calculated by the CRTA based on the tariff data provided by the 
Parties;  thus the Parties do not have information on the specific methodologies of processing the 
tariff data upon preparation of the Factual Presentation. 
 
5. The Agreement provides for a review of bilateral safeguard provisions, if necessary,  in 
November 2022.  Given this: 
(a) What is the process to determine the neces sity for reviewing the safeguards?   
 The Sub-Committee on Trade in Goods stipulated  in Article 25 of the Agreement will discuss, 
if necessary, the provisions of Article 22, after 15 y ears of the entry into fo rce of the Agreement.  
  If the Sub-Committee reports the necessity to  review the provisions, the Joint Committee 
stipulated in Article 13 will discuss the repor ts made by the Sub-Committee and make a 
recommendation on that to the Parties.  
 
 If the recommendation made by the Joint Committee  is in favour of the need to review the 
provision, both Parties will have a negotiation on that.  
(b) Given that trade patterns may change s ubstantially over several years, have the 
Parties made any arrangements to revi ew the provisions before 2022 if there are 
changes in trade patterns and domestic industry? 
 No, the Parties have not made any arrange ments for the review before 2022.  Unless 
otherwise agreed between Japan and Thailand, the Parties implement the Agreement in accordance 
with the relevant provisions of the Agreement.  
 
    WT/REG235/2 
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  Trade in services 
 
6. Does Thailand intend to publish a non-binding list of measures pursuant to Article 82? 
 Yes.  The detail of the issue of a non-binding list of measures is under the discussion at the 
Sub-Committee on Trade in Services. 
 
7. Why are Thailand's commitments on some telecommunications se rvices (CPCs 7523, 
75292, 75299 and 843) less liberal than thei r existing Mode 3 Uruguay Commitments? 
 The commitments undertaken by Thailand are th e result of the negotiations conducted by both 
Parties, taking into consideration each si de's specific interest and concerns.  
 Question from the Delegation of Canada 
 8. Canada takes note of the GATS-plus commitm ents taken by both Japan and Thailand 
in sectors such as professional services, com puter related services, telecommunication services 
and distribution services. Which of the sectors in which the Parties took GATS-plus 
commitments are viewed as having the potential for the most growth in bilateral services trade? 
 The Parties view the potential for the grow th in all GATS-plus service sectors committed 
under this Agreement. 
Questions from the Delegation of the Separate Customs Territory of Taiwan, Penghu, Kinmen, 
and Matsu 
9. Chart I.6 shows that Japan's commercial services trade with Thailand has run a 
growing surplus since 2005, (except in 2009).  Japan is a significant investor in Thailand, where its FDI stock in 2009 was US$ 22.3 billion, accounting for 3.1% of its total outward FDI.  According to Chart I.8, Japan's outward FDI stock with Thailand has increased continuously 
since 2003, (except in 2008). 
(a) Why did the total value of Japan's export s of commercial services to Thailand 
decrease by so much in 2009?  
 We do not have any reliable reasoning for the decrease, while we recognize that the receipt of 
royalties from Thailand in 2009 has declined.  
(b) Which were the sectors or sub-sectors mainly affected by this two-way decline in 
services trade in 2009?  
 There is no knowing the sector/sub-sector c oncerned, as we do not compile breakdown by 
country and industry for trade in service.  
(c) Why did the significant growth in Japan's outward investment in Thailand not 
help to boost its services exports to Thailand in 2009? 
 From the viewpoint of BoP (Balance of Payment) statistics, it is hardly detectable 
that foreign direct investment in a certain country  affects export of service to the country somehow.  
Just for your reference, there may be rather some relations with the mode 3 (supply through 
commercial presence) which FATS (Foreign affiliates trade in services) deals with.  http://www.oecd.org/dataoecd/32/45/2404428.pdf  
 WT/REG235/2 
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  (d) What were the main sectors driving the continuous growth in Japan's outward 
investment in Thailand, and what prop ortion was accounted for by services? 
 For the last six years, Japan's direct investme nt in Thailand has increased in such industries as 
transportation equipment and electric machinery.  
 Below is the historical data on Japan's direct i nvestment abroad available at the website of the 
Bank of Japan.     http://www.boj.or.jp/en/statistics/br/bop/index.htm/  
 
 On the other hand, the proportion accounted for by services is unknown. 
 
10. For some sectors and sub-sectors in which Japan has taken specific commitments in 
Annex 5 of the Agreement, it has locked in the li beralization (indicating SS) so that it does not 
become more restrictive.  The same is not the case for Thailand.  Negotiations are foreseen 
within five years after the entry into force of the Agreement for a general review of all service 
sectors including on the scope of commitment s scheduled as "SS" in accordance with 
Article 89.1 of the Agreement. 
(a) What does "SS" actually mean and what are its functions?  
 With respect to the designation of "SS" for relevant sectors or sub-sectors, all the existing 
measures inconsistent with market access and national treatment shall be inscribed as terms, 
limitations, conditions and qualifications inscribed in  the Schedule.  The function of the designation is 
to prevent the Parties from adopting new terms, limitations, conditions and qualifications in these 
sectors and service sectors with respect to these obligations.  
(b) What is the reason for the Parties to use the "SS" mechanism to lock in specific 
commitments undertaken in Annex 5 of the Agreement?  
 Please refer to the answer to Question (a).  
 
(c) How are the Parties allowed to withdraw commitments undertaken in other 
sectors or sub-sectors that are not marked as "SS"? 
 With regard to these sectors and sub-sectors, the Parties may adopt more restrictive measures 
than those in existing measures insofar as they are consistent with the term s, limitations, conditions, 
and qualifications in the specific commitments.  
11. According to Articles 87 and 112 of the Agreement, a Party may deny the benefits of the 
services and investment Chapters of the Agreement (Chapters 7 or 8) to a service supplier, or an 
investor (and its investments) of the other Party if  the service supplies or the enterprise is owned 
or controlled by persons of a non-Party, and the denying Party does not maintain diplomatic 
relations with the non-Party, or adopts or maintains measures with respect to the non-Party 
that prohibit transactions with the enterprise that would be violated or circumvented if the 
benefits of the Chapter were accorded to the enterprise or to its investments.  
(a) Why do the Parties not apply the con cept of "substantive business operations" 
provided for in Article 112 of the Agreement, Chapter 8 Investment, to the 
provision of Article 87, Chapter 7 Services Trade, for the purposes of denying the benefits acquired by the service supplier owned or controlled by persons of a non-Party?   WT/REG235/2 
 Page 5 
 
 
   The concept of substantive business operations is  included in the definition of "enterprise of 
the other Party" in Article 73 (f) and paragraph 2 of Article 112. 
 
(b) Why does the provision in the Agreement regarding the denial of benefits refer 
specifically to non-Parties with whom th e Parties do not maintain diplomatic 
relations?  Does this not constitute the creation of trade barriers as far as 
non-Parties not maintaining diplomatic relations with the Parties are concerned? 
 Article 87 is not intended to de rogate from the Parties' rights a nd obligations under the GATS.  
In this context, it should be noted that Article 87 does not provide that the Parties necessarily deny the 
benefit where the conditions therein are met. 
 
(c) GATS Article V.6 stipulates that juridical-person service suppliers of any other 
Member constituted under the laws of a Party to an agreement shall be entitled to treatment granted under such agreement provided that they engage in 
substantial business operations in the territo ry of the Parties to such agreement.  
Why then do the Parties deny the benefits  obtained by those service suppliers of 
a non-Party which is a WTO Member but does not have diplomatic relations with the Parties? 
 Please refer to the answer to Question (b). 
 
(d) Why does Article 112 of the Agreement, whic h provides for the denial of benefits 
to an investor (or its investment) of a non-Party, not include the procedures of 
prior notification and consultation provided for in Article 87, which apply to a service supplier that is not from the other Party? 
 The provisions with regard to the denial of be nefits differ as a result of the negotiations in the 
two Chapters. 
 
12. Thailand's schedules of specific commitments in Part 3 of Annex 5 of the Agreement, 
mode 4 commitments in computer and related se rvices, specify that the Thai government could 
set numerical ceilings and specific qualification re quirements in the column of limitations on 
market access and that it is changed from "n one" to "unbound, except as provided in the 
horizontal section" in the column on limitatio ns on national treatment.  Compared with 
Thailand's schedules of specific commitments in GA TS, new additional limitations on mode 4 in 
the computer and related services sectors have  been added, although Thailand undertakes new 
commitments in CPC 84240, 84250 (software implementation services), 84500 (maintenance and repair services of office machinery and equi pment including computers) and 84910, 84990 
(other computer services).  In addition, und er mode 3 for telecommunication services, the 
ceilings on foreign equity and shareholders have been rolled back. 
(a) Why has Thailand added these new limit ations on mode 4 in computer and 
related services? Could Thailand please provide details of the content established in order to implement these limitations? 
 The commitments undertaken by Thailand are the result of the negotiations taking into 
consideration Thailand's interests a nd concerns.  The commitment referred to is the revised offer for 
Doha Round which had been revised from the initia l offer to equal the commitment made under the 
Agreement, for which the limitations indicated in  the computer and related services are implemented 
according to the Working of Alien Act, B.E. 2551 (2008), by the Ministry of Employment.  WT/REG235/2 
Page 6  
 
  (b) How do these new limitations comply with  GATS Article V.1, which specifies 
that such an agreement provides for the absence or elimination of substantially all discrimination, as stipulated in Article XVII, between or among the parties through elimination of existing discrimina tory measures, and/or prohibition of 
new or more discriminatory measures? 
 As stipulated in Article 11 (Relation to Othe r Agreement), in the event of any inconsistency 
between this Agreement and the WT O Agreement, the WTO Agreement sh all prevail to the extent of 
the inconsistency.  
(c) Why does Japan agree to the addition by Thailand of new additional limitations 
on mode 4 in computer and related services? And, why does Japan agree to 
Thailand lowering the ceilings on foreign equity and shareholders on mode 3 in telecommunication services? 
 As stipulated in Article 11 (Relation to Othe r Agreement), in the event of any inconsistency 
between this Agreement and the WT O Agreement, the WTO Agreement sh all prevail to the extent of 
the inconsistency. 
 
Questions from the Delegation of the United States  
 
Liberalization of Trade and Tariff Lines  
 
13. According to Paragraphs 20 and 21 and Annex I of the Factual Presentation, 
Table A.I1-A.I2: 
 Thailand eliminates tariffs on 97.3% of a ll tariff lines covering 84.3% of imports by 
value from Japan under the Agreement.  98.2% of industrial tariffs are duty-free and 91.5% of agricultural tariff lines are duty-free under the Agreement. 
 
 Japan eliminates duties on 90.2% of all tariff lines covering 92.1% of imports from 
Thailand under the Agreement.  However, though 96.5% of industrial tariffs are 
duty-free, only 64.0% of agricultural ta riff lines are duty-free under the Agreement. 
 
(a) How does Japan explain its highly disp roportionate liberalization between the 
industrial and agricultural sectors? 
The trade liberalization undertaken in the Agre ement is the result of negotiations between the 
Parties with the aim to strike a balance between their specific interests and sensitivities, while also 
ensuring conformity with the requirements of GATT Article XXIV. 
 
(b) For what reasons did Japan undertake libera lization on a lower percentage of 
agricultural tariff lines compared to Thailand? 
 The figures reflect the result of the negotiations conducted by both Parties, taking into 
consideration each side's specific interest and concerns. 
    
 
   WT/REG235/2 
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  Japan's liberalization schedule 
 
14. Paragraph 22 of the Factual Presentation indi cates that in Japan's trade liberalization 
commitments, of the total 870 lines that still retai n a duty at the end of the implementation 
period, the majority fall under HS sections I to  IV (approximately 87%).  Notably, 53% of the 
tariff lines in Section I (live animals and animal  products) and 47% of the lines in Section IV 
(prepared foods) still retain a duty after full implementation in 2022.  
 Could Japan please explain how the level of tariff elimination achieved meets the 
"substantially all trade" standard set out in GATT Article XXIV?  
 The Parties to the Agreement believe that the coverage of the Agreem ent between the Parties 
fulfils the "substantially all trade" requirement under GATT Article XXIV.   "Substantially all trade" does not amount to a ll trade.  The criterion refers to overall trade 
rather than to either imports or exports, and is not necessary equal to the coverage of specific sectors 
or products. 
  Moreover, as the liberalization undertaken by the Parties in the Agreement covers 
substantially all the trade carried out between the Part ies, we are of the view that the coverage of the 
Agreement is fully consistent with our WTO obligations. 
 
Trade in Services and Investment 
 
Scope and Definitions 
 
15. Paragraph 58 (and in particular footnote 17) of the Factual Presentation describes the 
extent to which services sectors are covered by  the Agreement's obligations on investment 
protection.  In particular, it notes that certai n obligations, such as those on transparency 
(Article 101) and investor-State dispute settlemen t (Article 106), do not apply to any services 
sectors, while others, such as the obligation to  provide the minimum standard of treatment 
(Article 95), do not apply to financial services specifically. 
(a) Could the Parties explain why they choose to exclude all investment in services 
sectors (mode 3 suppliers) from:  (a) th e obligation under Article 101 to provide 
transparency (publication) of domestic laws and regulations, and public 
participation in the development of such  measures (to the extent possible); and 
(2) the Article 106 provision that allo ws investors to seek resolution of 
investment disputes before a neutral arbitral body? 
 Such obligations as "transparency" and "i nvestor-State dispute settlement" are usually 
included in the Investment Chapte r of the Japanese EPAs and applicable to all investments.  These 
obligations were excluded from those applicable to  investments in service sectors as a result of the 
negotiations, taking into consideration each other's interests and concerns. 
 
 (b) How does exclusion of this large area  of economic activity (all services sectors) 
 from these obligations accord with the objective established by the Parties in 
 Article 1 of the Agreement to "encourage and promote investment and  ensure protection for  investments and investment activities in the Parties"? 
 
  
 WT/REG235/2 
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   All obligations provided for in the Investment  Chapter are applicable to all investments 
except those in services sectors to encourage and promote investment and ensure protection for 
investments and investment activities in the Parti es.  Such provisions as Article 94 (Access to the 
Court of Justice), Article 102 (Expropriation a nd Compensation) and Article 103 (Protection from 
Strife) are applicable to investments in services sectors for their protection. 
 
(c) Why did the Parties further expressly ex clude investments in financial services 
from the obligation in Article 95 to pr ovide "treatment in accordance with 
international law, including fair and e quitable treatment and full protection and 
security"? 
 The obligation of "treatment in accordance with international law, includi ng fair and equitable 
treatment and full protection and security" is usua lly included in the Investment Chapter of the 
Japanese EPAs and applicable to all investments.  This obligation was excluded from those applicable 
to investments in financial services as a result of  the negotiations, taking into consideration each 
other's interests, concerns and sensitivities. 
 
16. Article 92 of the Agreement's Chapter on Investment requires that each Party "take 
such reasonable measures as may be available to  it" to ensure that local authorities and 
governments observe the obligations of the Chapter. 
 Could the Parties confirm that the obligations undertaken under the Chapter on 
Investment are not legally binding for local gov ernment measures?  If so, why did the Parties 
choose to entirely exclude local government measures from the scope of the Chapter's 
obligations? 
 
 The Parties are legally bound to take such reas onable measures as may be available to it to 
ensure that local government measure s are consistent with the obligations of the Investment Chapter.  
In other words, although the Parties do not recognize any local government measures that may not 
conform to the Chapter, in case those local governme nts might have measures that do not conform to 
the Chapter, the Parties will take such reasonable measures available to it to ensure observance of the 
provisions of the Chapter by the local governments.  
 
17. Paragraph 61 of the Factual Presentation no tes that, under Article 82 of the Agreement, 
Parties are obligated to produce a non-legally bi nding list of measures affecting market access, 
national treatment, and additional commitments in all services sectors.  It further notes that 
Thailand has not confirmed whether such a list exists for Thailand. 
(a) Could the Parties confirm that they h ave both exchanged and made publicly 
available their lists of measures, pursuant to Article 82 of the Agreement?  Could the Parties also provide a link or citation to where these lists can be found? 
 Both sides have not exchanged the non-legally  binding lists pursuant to Article 82 of this 
Agreement.   
(b) If both Parties have not yet fulfilled their Article 82 obligations (required as of 
November 2007), what steps are the Parties taking to remedy this? 
 Both sides continue to discuss when to exchange and make public ly available the lists at Sub-
Committee of trade in services.    WT/REG235/2 
 Page 9 
 
 
  Denial of Benefits 
 
18. Paragraph 67 of the Factual Presentation notes that, pursuant to Article 87 of the 
Agreement, a Party is permitted to deny the benefits of the Chapter on Services to a juridical person of the other Party, if that juridical person is owned or controlled by persons of a non-Party, and irrespective of whether or not that juridical person has substantive business 
operations in the territory of that other Party. 
 Could the Parties explain how this pr ovision accords with the requirement under 
Article  V.6 of the GATS that a service supplier of a non-Party that is a juridical person 
constituted under the laws of an RTA Party must  receive benefits granted under the Agreement, 
provided the supplier engages in substantive business operations in the territory of a Party? 
  Paragraph 1 of Article 87 stipulates that a Pa rty of the Agreement may deny the benefits of 
Chapter 7 to a service supplier of the other Party that  is an enterprise where it is established that the 
service supplier is owned or controlle d by persons of non-Party.  This does not mean that the Parties 
derogate from Article V.6 of the GATS.  In this cont ext, it should be noted that the denial of benefits 
under Article 87.1 is subject to prior notificatio n and consultation with the other Party of the 
Agreement and the Party may not deny  the benefits to such enterprise.  
 
Liberalization Commitments on Trade in Services 
 
19. Paragraph 92 of the Factual Report notes that, where a Party to the Agreement modifies 
a commitment in its GATS Schedule pursuant to Article XXI of the GATS, the same 
modification will be made to any identical commitment in that Party's schedule under the 
Agreement, without further negotiation. 
 Could the Parties clarify whether the any compensatory adjustment agreed pursuant to 
a GATS Article XXI process would also automatica lly be incorporated into their Agreement?  
(Article 78.1 of the Agreement speaks only to  modification/withdrawal of RTA commitments, 
not to any compensatory adjustment). 
  Article 78.2 of the Agreement stipulates that "if modification or withdrawal has been made to 
such commitment with regard to its Schedul e of specific commitments under the GATS and 
compensatory adjustment has been made to the ot her Party as an "affected Member" in accordance 
with Article XXI of the GATS, the Parties shall ag ree to amend this Agreement to incorporate such 
modification or withdrawal into it without furthe r negotiation subject to their applicable domestic 
procedures".  Compensatory adjustment is one of th e conditions for such incorporation without further 
negotiation. 
 
20. Paragraph 109 of the Factual Report not es that Thailand's specific commitments for 
telecommunications services under th e Agreement include a mode 3 limitation on foreign equity 
in certain sub-sectors that is more restrictive than its commitments for these sub-sectors under 
the GATS. 
 Could the Parties explain why Thailand in cluded less comprehensive commitments for 
these sub-sectors under the Agreement than those it  is required to provide to all WTO Members 
(including Japan) under the GATS? 
  The commitments undertaken by Thailand are the result of the negotiations, taking into 
consideration Thailand's interests and concerns.  
 WT/REG235/2 
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  Transparency 
 
21. Paragraph 125 describes various transparen cy provisions included in the Agreement, 
such as the commitment to promptly publish la ws and regulations (Article 3), to provide 
opportunity for public comment on the adoption, amendment or repeal of regulations affecting 
any matter covered by the Agreement (Article 4), and to provide traders with reasonable notice 
and the ability to present facts in support of its case (Article 5).   
 We would appreciate if Thailand could please provide examples of how it has 
implemented the transparency provisions described in this paragraph.   
 As a general practice, Thai laws and regula tions are published in the Royal Gazette, agency 
public notifications, and on the internet.  Thai gove rnment also provides opportunities for the Public 
to comment on proposed legislation before its adop tion.  Various mechanisms such as convening of 
meetings, brainstorming and, public hearings (or providing multiple channels for the public to make 
comments such as website, web board, or call center) are used to achieve this objective.  The Public is 
also given the opportunity to share their views in writing by sending a letter to the responsible 
authorities involved.  
  Regarding administrative proceeding, Thai Ad ministrative Laws, in general, provide basic 
right for traders to receive reasonable notice, including  a description of the nature of the measure to be 
applied, specific provisions upon which such measure w ill be based, and the facts which may give rise 
to a cause of action, and provide for traders a reas onable opportunity to presen t facts and arguments in 
support of his/her position.  In addition, specific laws , such as the customs laws, also affirm rights of 
traders which is similar to what is provided by the Thai Administrative Laws and also specify the 
steps and procedures for traders to follow should th ey be confronted with customs-related issues.  
 
Tariff-Rate Quotas under the Agreement 
 
22. Paragraph 1 of Annex II indicates that Jap an maintains tariff-rate quotas on certain 
agricultural products (six tariff lines at the 9-di git level, including fresh bananas, pineapples, 
preparations of meat, cane molasses, and esteri fied starches).  Can Japan clarify why these 
sensitive products were given a specific allocation  and if there are mechanisms for reviewing the 
allocation after full implementation? 
 It reflects the result of the negotiations conduc ted by both Parties, taking into consideration 
each side's specific interest and concerns.  Th ere is no mechanism for reviewing except general 
review.  
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