Multilateral and Bilateral Trade & Investment,
and Regulatory Cooperation<Recommendations to the EU and Japan>
A-EJ-1

Formation of a common economic institutional environment(Joint recommendation)

In 2007 BRT in Berlin, the working party recommended a study on the feasibility of awide-ranging bilateral agreement to promote trade and investment. Task forces wereformed on both sides for that purpose and joint recommendations were presented at theBRT 2008 in Tokyo. This report outlined a number of areas of common interest where
EU-Japan cooperation could be strengthened. The Working Party supports the jointstatement adopted by the EU–Japan Summit in Prague on 8 May 2009 aiming notably for“strengthening the integration of their economies with a view to better exploiting the fullpotential of their economic relationship” and calls upon the authorities to work towards
this goal by focussing on issues that are of Japanese and European interest and create awin-win situation for both sides.
Moreover, the Working Party believes that discussions should be initiated and pursued
through respective administrations from the highest political level to ensure that thepolitical will is translated into concrete and measurable improvements in the business andtrade environment. Aiming for an ambitious removal of barriers to trade and investment, abroad range of issues should be addressed, especially harmonisation of regulatory
processes, mutual acceptance of product standards and certifications, competition rules,
services and procurement, in a balanced and mutually beneficial way.
A-EJ-2

Support of WTO Doha Development Agenda for fight against protectionism(Joint Recommendation)

The financial crisis and subsequent economic crisis are hitting trade flows hard around theworld. The BRT is very concerned that growing protectionism will deepen and prolong the
economic crisis. Protectionist rhetoric and some very real protectionist measures for
instance in the US, China, Russia and Brazil have had a chilling effect on the trade andinvestment strategies of companies. Moreover, trade defence measures are almost certain to
increase around the world as prices for energy-intensive products decrease to a low leveland state subsidies flourish.
Given this background, the WTO must play a crucial role and be proactive in bothpreventing the closing of world-wide markets and the introduction of new restrictions on
investments, market access and mobility for workers. The WTO is to be commended for its
initiative of monitoring protectionist measures or new trade-hampering regulations aroundthe world. The WTO should continue to pursue this clear objective of advocating free1

trade and denouncing all protectionist measures taken by its members. Moreover, it should
strengthen its stance by requesting WTO members to explain the reasoning andcompatibility with WTO law of their measures to the whole WTO membership. This will
mitigate the rising risk of protectionist measures and restore business confidence in thesystem by providing a concrete avenue to counter unhelpful protectionist tendencies. It isalso critical that the WTO strongly counters any weakening of commitment to key WTO
disciplines such as TRIPS. We call on the European Commission and Japanese government
to jointly advocate this policy in the WTO.
The Working Party is a strong supporter of the WTO Doha Development Agenda (DDA)
negotiations and continues to urge the European Commission and the Government of Japan
to exert their utmost efforts in concluding ambitious negotiations, based on the current
modalities, by the end of this year. The Working party is concerned, however, that theambitious level of objectives sought at the start of the round will not be maintained in the
final conclusion. We call on our leaders to press for the most ambitious deal possible.
The provisional NAMA results contained in the revised December 2008 draft will
effectively lead to tariff rate cuts in OECD countries and, eventually China, but they alsoneed to commit other emerging countries to stronger tariff reductions more explicitly.
Moreover, China in particular has to show further ambition as it could still benefit from animplementation period of more than 10 years and maintain high average tariff rates despite
the competitiveness of many sectors. Furthermore, it is unclear how emerging countries
will make use of their flexibilities granted under the formula. There is a risk that the tariff
lines which we have export interests could be excluded from tariff reductions. Finally,
emerging countries have not yet shown sufficient willingness to participate in specificsector agreements and should show stronger commitment.
A-EJ-3 Applying international standards and enhanced co-operation in the
promotion of new global standards (Joint recommendation)
1. The Working Party urges both governments to adopt international product standards
where applicable and, in the meantime, mutually recognise products certified undersimilar and equivalent product standards in sectors such as Medical Devices,
Construction Materials and Organic Products.
2. The Working Party recognises the importance of global patent harmonization andstreamlining of the patent system as a way to promote innovation, reduce costs and boost
legal certainty. The authorities of the EU and Japan should take the lead in these efforts.
3. We also believe that the two authorities should step up efforts against global
counterfeiting and piracy and cooperate closely to establish a new common international
legal framework for IPR enforcement. In this regard, we support the ongoing negotiationof an international anti-counterfeiting trade agreement (ACTA) and urge the two
authorities to exercise active leadership in order to reach agreement as soon as possible.

24. Given the nature of the issue and the importance for business as well as for society ingeneral, the two governments should make an effort to harmonise the regulations forenergy conservation and relevant labelling rules.
5. The governments of the EU and Japan should introduce regulatory cooperation throughwhich, once an economic operator is approved as an AEO (Authorized Economic
Operator) in Japan, its status should be recognized without additional formalities in theEU, and vice versa.
A-EJ-4
1.

Supporting timely development of business(Joint recommendation)

Social security contributions (avoiding double contributions):
The Working Party welcomes the fact that following the agreements between Japanand Belgium and France in 2007, the social security agreements between Japan and
the Netherlands and Czech Republic have entered into effect, and those between
Japan and Spain and Italy have been signed. Furthermore, negotiation is underway
between Japan and Ireland, and at preparatory stage between Japan and Hungary
and Sweden. Japan and the Member States of the EU should make further efforts
to expand the network of Social Security Agreements. In addition, they should
introduce an interim measure, by which a host country should either exempt
contribution to pension funds unilaterally or should refund in full when expatriates
return to a home country.

2.

Smoother and swifter movement of intra-corporate transferees (ICTs):
1) The Japanese and EU authorities should realize far-reaching liberalisation of the
movement of intra-corporate transferees (ICTs) . Such liberalisation could beachieved by the following systems:•

A framework agreement between the mother company, which sends expatriates,
and the host country, stipulates the maximum number of expatriates. Within theagreed limit, the mother company is free to send ICTs to that country without
further obtaining individual work permits.

•

When the mother company concludes such an agreement with several Member
States in which its subsidiaries or branches have operations, movement of ICTs
between those countries should be free from obtaining a new work permit as longas the total number of the agreement is respected.
2) The Japanese government should abolish the system requiring foreigners with avisa additionally to obtain a re-entry permit, such that permission to leave andre-enter the country freely is automatically granted when the visa is issued. We
welcome the revision of the Immigration control law under way in Japan and3urges the GOJ to implement the revision swiftly, once it has passed theparliament.
3. Personal data protection regime;
The Working Party believes that the ultimate objective of personal data protection
for individual business is to adopt and implement a reliable and cost-effective
personal data protection system at a level of a corporate group, within which theflow of data should be free across national borders. In order to achieve this, thenational legislation of each country should promote such a system rather than
impede by creating different requirements.
To realize such business environment between the EU and Japan, the governmentof Japan should request the European Commission to launch the adequacy-finding
procedure on the basis of Article 25(6) of Directive 95/46/EC.
In parallel with this procedure, the government of the EU and Japan should launch a
dialogue in order to create an international framework which allows adoption andimplementation of a reliable and cost-effective personal data protection system atthe level of a corporate group, within which the flow of data should be free acrossnational borders.
<Recommendations to the EU>
A-E-1

EU policy on company law

The European Commission adopted a proposal for a Council Regulation on the status
for European Private Company in June 2008. According to the proposal, it is to be
applicable from 1 July 2010. The Council should adopt it without a delay, and thestatute should realize the following points.
•

Widely accessible, easy to set up and inexpensive to run•

Allowing a great deal of flexibility to founders and shareholders to organize
themselves in the way that is best suited to their activities: and•As uniform throughout the EU as possible.

A-E-2 Japanese expatriates
1. The Commission announced that it would present in 2009 a proposal for a directive
setting out common procedures to regulate the entry into, temporary stay andresidence in the EU of intra-corporate transferees (ICTs). Such a draft directive

4

should include;
1) Possibilities for intra-corporate transferees to submit an application for awork-residence permit or a residence permit for self-employment after entering
the assigned country;
2) Provisions on intra-EU mobility;
3) Possibilities for spouses, to be automatically granted the same or similar rights as
the holder of the permit upon their arrival.
The application of integration measures to ICTs should be voluntary.
2. More than three years have passed since the due date of the transposition into the lawof the Member States of the Directive 2003/109/EC on long-term residence status.
The first report required under the Directive is due by 23 January 2011. We lookforward to hearing from the European Commission about the actual state of its
implementation in each Member State.
3. The Directive is not applicable in the UK, Ireland and Denmark. Japanese nationals
in the UK, where their number is the highest among EU countries, therefore, do notbenefit from this Directive. The UK government should take action in order to enable
them to benefit from the EU directive.
A-E-3 Community Patent and Patent Prosecution Highway
1. We would like to urge the EU and its member states to adopt and implement a
Community Patent as soon as possible.
2. The Patent Prosecution Highway (PPH) aims to facilitate, and enhance the quality ofpatent examination at a participating IP office, by utilizing and sharing the result of
examination at another participating IP office. Therefore the PPH is highly
beneficial for patent applicants as it will expedite and improve examinations. We
would like to urge patent offices of other EU member states as well as the EPO toparticipate in the PPH, for the benefit of patent applicants both in the EU and inJapan.
A-E-4 Fight against counterfeited, pirated and contraband goods
1. Regarding the fight against counterfeiting and piracy, it is anticipated that theCommission will issue a report in 2009. We would like to see further necessary
steps such as possible proposals for modification of the Enforcement Directive witha view to step up efforts of all the EU member states to fight against counterfeited,pirated and contraband goods, both inside and outside of the EU.

5

A-E-5 Competitiveness of the EU economy
1. Customs Classification;
We believe that customs classification should be done in accordance with theHarmonized System Convention rules. However, we also believe it to be a fact thatthe rules do not provide a clear method of classification for such products aselectric-electronics products, where the technical convergence of IT and non-IT
products has emerged. This situation makes interpretation and classification moredifficult and complicated than ever, and has undermined transparency, predictability
and promptness for businesses. It is requested that the EU acknowledges theconcerns and difficulties the businesses are facing, and to take steps to increase
predictability and improve transparency upon importation of the IT products. The
improvement of the said situation will indeed contribute to the ICT industry
development.
2. Taxation
2.1 Common Consolidated Corporate Tax BaseThe European Commission should present a proposal for a common consolidated
corporate tax base (CCCTB) to the Council and Parliament this year. It should
include the following points to improve the competitiveness of the EU economy.
•

Non-taxation of unrealised gains on goodwill within a groupof companies that form CCCTB•
Non-application of arms-length principle within a group ofcompanies that form CCCTB.
•
Off-setting of profits and losses within a group ofcompanies that form CCCTB.
2.2 Merger Directive
The scope of the Merger Directive (90/434/EEC) should be expanded to include
the transfer of real estates and other intangible assets in reorganisation.
Furthermore, the shareholding requirements should be abolished.
2.3 EU TPD
To provide sufficient incentive to the compliance with the EU TPD, the EU andthe Member States should commit themselves to exemption from penalties (i.e.
penalties related to non-compliance with documentation requirements, penalties
related to transfer pricing adjustments and interest related to adjustments) if acompany submits an EU TPD acting in good faith and in a timely manner.

6

The EU and its Member States should not treat companies in good faith andcompanies that try to evade taxation in the same way as the imposition of penalties
even when EU TPD is prepared in good faith could lead to undesirable distortionsin the single market by forcing companies to adopt artificial transfer price in order
to avoid penalties.
3. Competition Policy
There are guidelines in the determination of the amount of penalties in case of an
infringement of the competition rules. We would like to see more clarity in thedetermination of the amount of penalties so that businesses will not be unduly
deterred and that the ‘Lisbon Strategy’ will be achieved.
4. Integrated approach for CO2 reduction:
The European Commission’s CO2 Communications of February 2007 calls fortechnical improvements of passenger cars to the level of an averaged CO2 emissionof 130 g/km in order to achieve the EU objective of 120 g/km in 2012. On 19
December 2007, the Commission has further proposed legislation to reduce theaverage CO2 emissions of new passenger cars to 120 grams per kilometre by
2012.For CO2 reduction, various measures including improvement of road systems
and traffic flow, improvement of fuel quality, education of drivers towardeco-driving and fiscal incentives to encourage the purchase of more fuel efficientcars are important. So, combining the efforts of all relevant parties involved: auto
industry, fuel sector, policy makers and drivers to achieve the objective of CO2
reductions, which is called an integrated approach, is the most balanced and realistic
way to achieve this goal. The BRT supports this approach.
5. Better Regulation;
In reviewing the existing regulations or establishing new ones, it is extremely
important to consider the relevant regulations from the perspective ofcompetitiveness of the economy and the industry. In this connection, the agreed
processes of Stakeholder Consultations and Impact Assessment should be duly
implemented. Moreover, the Integrated Approach, a concept of appropriate burden
sharing by the entire society, is important. The BRT supports the initiative of theEuropean Commission for Better Regulation.
6. REACH
The EU regulation of Registration, Evaluation, Authorization and Restriction ofChemicals (REACH) has been put into effect since June, 2007. After entry into
force of REACH, many of those tasks, including the provision of information on
REACH to companies and the general public have been transferred to the European
Chemicals Agency (ECHA). We recommend that the EU government takes further

7

actions for education and capacity building in developing countries for compliancewith REACH. We also request consideration by the EU government to establishingcertain lead-times or grace periods for compliance in cases involving developing
country parties in supply chains.
< Recommendations to Japan >A-J-1

Recognizing and applying international standards

The Working Party recommends the Japanese Government to place particular emphasis on:
1.

Food Additives The Ministry of Health, Labour and Welfare submitted a list in
December 2002 of, in its own words, “unauthorized food additives whose safety is
globally confirmed and are widely used outside Japan.” Out of this list of 46 “priority
additives”, only around half have been approved in five and a half years. The
government of Japan should seek to immediately approve the remaining food additives
on this list and then prepare a new list, in close consultation with the EU Authority, on
any remaining additives that are officially recognized as safe and in wide use, and seek
to have these approved as soon as possible, and certainly by the end of 2009.

2.

Construction Products The Government of Japan should work together with the EU
Authorities towards mutual recognition of all JAS/JIS and EN standards for allbuilding materials. Procedures for foreign testing institutes seeking accreditation under
JAS/JIS should be streamlined. Mere reference to ISO standards within JAS/JIS, has
proved to not be adequately helpful in facilitating the process.

3.

Organic Products With the implementation of the new organic JAS law in April 2006,
the mutual recognition agreement between EU and Japan on organic productcertification and labelling ceased to be valid. The Government of Japan should work
together with the EU Authorities to achieve mutual recognition of Organic Food
Products labelling.

4. Labelling rules The Household Product Quality Law and accompanying voluntarylabelling guidelines “hyojikitei” prescribe in extreme detail how household products should
be labelled when sold in Japan. The Government of Japan should issue clarifying orders toprovide retailers with flexible alternatives for providing Japanese consumers with globallysourced products while taking full responsibility for the quality and safety of the products.
5.

Cosmetics The Government of Japan should establish a mechanism enabling swift
acceptance of ingredients widely used or recently recognised in Europe and the U.S.

6.

Medical Equipment The Government of Japan should intensify the work to simplify
and harmonise the regulatory processes in the field of Medical Devices with that of the
EU. In particular, mutual acceptance of regulatory practices and standards concerning
principles of safety and performance, marketing authorisation, clinical trials and on-site8audits of manufacturing facilities should be promoted.
A-J-2

Improving regulatory transparency and accountability<Summary of recommendation>
The Government of Japan should reinvigorate its efforts to improve transparency andconsistency in all areas of regulation, including the development of new regulations, andthe accountability of regulators, in order to facilitate business in Japan for both foreign anddomestic firms. The Government of Japan should ensure that:1.

All Ministry-proposed laws, regulations, guidelines and agency recommendations are
made available for public comment, by enforcing and monitoring compliance withexisting public comment requirements.

2.

Complete draft laws are made available for public comment, rather than meresummaries, before bills are submitted to the Diet for deliberation.

3.

A 30-day waiting period is actually implemented between the expiration of the publiccomment period and the submission or release of the final law, regulation, guidelines
or agency recommendation, in order to give officials time to consider the comments
received.

A-J-3

Creating a more efficient product approval process in the human and animal
health sectors

Japan needs to reduce the time and costs associated with introducing innovative newtreatments in the human and animal healthcare markets in Japan and to bring Japanese rules inline with global standards. The Government of Japan is therefore urged to create more
efficient product approval processes, in particular by:
1.

Shortening the medical equipment certification process: accepting clinical trial data
generated overseas and harmonising Good Clinical Practice (GCP) and Quality
Management System (QMS) requirements with international standards. The Working
Party recommends that in the meantime, both governments should officially recognisethat either ISO 14155:2003 (and as subsequently amended) or Japan GCP is, inprinciple, generally acceptable to either party for all medical device clinicalinvestigations and that, in principle, a QMS audit conducted by responsible authorities
in Japan (PMDA or third party testing organisation) or by Notified Bodies in the EU isgenerally sufficient as evidence of compliance with quality management system
requirements when applying for market authorisation on either market.

2.

Eliminating differences between Japanese GCP and the GCP established by theInternational Conference on Harmonisation; and increasing the number and quality of9staff working on consultation and approval review in the Pharmaceutical and Medical
Devices Agency (PMDA).
3.

Improving the product approval process for animal health products by adhering to thestandard administrative review period of one year. This could be achieved bystreamlining and accelerating administrative procedures and eliminating unnecessary
and scientifically unjustified requirements.

A-J-4

Ensuring free and open competition in services

The Working Party urges the Government of Japan to tackle the lack of free and open
competition in Japan’s services markets. In particular, the Government should:
1.

Remove obstacles to integrating the operations of financial groups. In particular, theinitiated reforms of firewall restrictions should be implemented fully to allow financialgroups to structure their organisations in Japan in the same way as they do in the rest of
the world.

2.

Implement the privatisation of Japan Post so as to ensure a level playing field. Thismeans that the Kampo insurance business should be subject to the same capital,
solvency margin, tax and policyholder protection funding requirements as private
sector insurers. Limits are needed on its expansion until competitive safeguards havebeen established to prevent cross-subsidies from its existing dominant position.
Similarly, the insurance business of cooperative societies (kyosai) should be subject tothe same requirements as private sector insurers.

3.

Exempt securities issued by governments and government agencies of major countries,
including European governments, as well as securities listed in the exchanges ofEuropean markets that have appropriate disclosure requirements, when implementing
the proposed revision of disclosure rules within the Financial Instrument Exchange
Law (FIEL), the amendment of which is currently under discussion in the Japanese
Parliament.

A-J-5

Promoting foreign direct investment

The Government of Japan should promote growth through further participation of Japanesefirms in the global economy and of foreign firms in the domestic economy. To this end, andin line with the treatment applied to stock swaps involving purely domestic companies, it
should consider allowing tax deferrals for capital gains stemming from direct cross-bordermergers and re-organisations.
The Government should also ensure that rules of fundamental importance to foreigncompanies are not altered without prior notice and consultation. In this context, theWorking Party calls on the Government to use all means available, including revision of
Article 821 of the Corporation Law, to ensure legal certainty for foreign companies

10established as branches in Japan.
A-J-6 Promoting EU-Japan cooperation in commercial aircraft development andproduction
Historical circumstances have created practices that have distorted the market mechanismin the field of large (more than 100-seat) commercial aircraft procurement. As a result,Japanese airliners buy almost exclusively from one supplier. The Japanese Government
should promote fair competition by providing similar support to European – Japan
Cooperation programs in the field of commercial aircraft development as is currently given
to the cooperation between Japanese manufacturing and their U.S. counterparts. European
companies can offer technology, know-how, and production and management techniquesthat can benefit Japanese manufacturing companies and capitalise on their strengths, for the
benefit of both Japan and the EU.

The Japanese government should set a positive example to the private sector of theadvantages of sourcing from more than one aircraft manufacturer by buying large aircraftfor official government use from an alternative supplier.
Similarly, the Japanese aerospace and defence industry is at times reluctant to work with
European companies,due to the long-standing relationship with North Americancompanies, and limited awareness of the European aerospace sector.
European aerospace and defence companies are ready to consider joint development of new
products and willing, within such programs, to transfer to the Japanese aerospace anddefence companies advanced technology and know-how. The improved capacity andglobal competitiveness of the Japanese industry following such a cooperation should be
increasingly important, given the acute need to cut procurement costs and the current
discussion in Japan of a re-interpretation of the current very strict export ban.
Co-operation with Europe will also allow final Japanese users of equipment such as fighter
air-crafts to directly manage configuration control, not possible through the “black box
approach” employed by current partners.

11