Recommendations of the
EU-Japan Business Dialogue Round Table
to the Leaders of the EU and Japan
Tokyo
June 20-21, 2004

333

“Giving a New Impetus to EU-Japan Relations
andAddressing New Sectors”

Part I
Summary of Recommendations
The EU-Japan Business Dialogue Round Table (BDRT) held its annual meeting inTokyo on 20 and 21 June 2004 in the presence of Mr. Nakagawa, Minister for Economy,
Trade and Industry, Mr. Tabata, Senior Vice-Minister for Public Management, Home
Affairs, Posts & Telecommunications, Mr. Aisawa, Senior Vice-Minister for Foreign
Affairs, Commissioner Lamy, and Commissioner Liikanen, under the co-chairmanshipof Mr. Viscount Etienne Davignon and Mr. Yotaro Kobayashi.
The BDRT is pleased that good relations in trade and investment have been maintained
between the EU and Japan. Particularly, the EU and Japan are important partners of FDI,
respectively, and further strengthening mutual investment is the key to economic
development for the EU and Japan, as stressed by both leaders at the last Summit
meeting.
The BDRT welcomes the 1 May 2004 EU enlargement which is an event of greatsignificance for Europe and also may bring important trade and investment
opportunities for the EU and Japan.
However, the EU-Japan economic relationship has not reached its full potential,
particularly in the field of foreign investment. In 2004, a lot of the new items are being
added to last year’s Recommendations. The BDRT requests that more fruitful efforts bemade by both the EU and Japanese Authorities to implement the Recommendations,although some positive response has been noticed in the past.

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The BDRT had a general discussion on the world economic situation and spent asignificant time on the recent developments in China and East Asia.
The BDRT participants underlined the rapid expansion of the Chinese economy whichmakes it not only an important market but also a determining factor of the global
economy, notwithstanding the issues this country still has to overcome.
The EU and Japan’s bilateral cooperation with China could result in the sustainable
development of that country. Nevertheless, among others, the most important in the near
future in the relation with China would be the way in which China complies with WTO
commitments.
Regarding East Asia, the BDRT noticed that the sense for the importance of community
building has emerged for the first time in history through the academics, politicians andcitizens.
In this sense, 50 years’ history of the European Union represents experience and lessons
from which a lot could be learned with a view to building an Asian community.
The BDRT hopes that the Authorities will take account of those new developments.
1. Highlights(1) Trade and Investment – Call for a Joint Statement on FDI
The BDRT proposed in its Recommendations for 2003 that the Authorities of the
EU and Japan negotiate an FDI Enhancement Agreement establishing aframework for mutual efforts to promote and facilitate an increase in foreign
direct investment, focusing on the following four areas of issues:a) Eliminating tax-related barriers to investment such as withholding
taxes on dividend payments between parent and subsidiaries and on
interest and royalty payments among affiliated companies;b) Facilitating business development through the smooth movement of
human resources;c) Facilitating tax-neutral cross-border corporate reorganisations; andd) Promoting regulatory reform.
Although many promotional activities have taken place since the last BDRT
meeting, tangible progress is still pending in terms of the substantial items
mentioned above. Therefore, the BDRT repeats most of the Recommendations
made in 2003 with respect to the enhancement of mutual direct investment
between the EU and Japan.
The BDRT understands the numerous political and practical difficulties involved
in developing a formal agreement on FDI and ask this year that, as a first step, theheads of both Authorities commit themselves to the principles and general
direction of a framework for a policy to promote mutual direct investment. Such2

2004 EU-Japan BDRT
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a joint declaration should explicitly refer to the priorities in policy-making thatwere raised by the BDRT last year.
The BDRT takes note of the real progress made during the past year. However, itconsiders that it is important to accelerate the implementation of all the
Recommendations in order to eliminate the numerous outstanding structuralbarriers to an increase in mutual direct investment between the EU and Japan.
(2) Accounting and Taxation
The BDRT stresses the importance of the adoption of common international
accounting standards -as early as possible- for the development of international
comparability and transparency. These standards will be implemented in the EU in2005, with a few exceptions.
The BDRT notes that the Japanese Government and the EU are presently
negotiating on this matter, taking into account the question of timing and quality ofstandards.
From the industry’s point of view, the BDRT asks that the European Commission
and the Government of Japan strive to remove obstacles in capital market rules as
quickly as possible for promotion of mutual investment between the EU and Japan.
The BDRT asks the European and Japanese Authorities to take all necessary steps
to achieve convergence of international standards of accounting, auditing, anddisclosure.
The governments of the USA and Japan reached an agreement in November 2003
to revise the Tax Treaty between their two countries. The main feature of therevision is the reduction or elimination of certain withholding taxes. We welcome
this decision and hope that it can be replicated in relations between the GOJ andthe EU in order to realise fully the benefits of the single market.
(3) ICT – Information and Communication Technology
The BDRT is pleased to find that the development of broadband infrastructure
environment has been addressed by both the EU and Japanese Authorities. In
2004, the new Recommendations focus on the utilisation of broadband applications
for all society as well as new, but long-existing issues such as cyber security,protection of intellectual property rights and the development of Voice-over IP(VOIP) services.
In Europe, the rate of broadband penetration in fixed networks has progressed but
has not allowed to catch up with Japan yet. Both Authorities should accelerate
their activities to achieve goals on broadband penetration, and should revise theirgoals ceaselessly for broadband subscription to a higher level.

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The BDRT considers that both the EU and Japanese Authorities should promotefurther development of the ICT environment aiming at effective and increased
utilisation of the broadband networks and applications. Especially, in areas suchas employment and labour, medical services, education and public services, theAuthorities’ role is critical to enhance broadband utilisation. Europe and Japan are
confronted with a problem of an ageing population, which will require an increasein productivity in the years to come. These productivity gains will not be possible
without massive use of ICT centred around broadband networks and applications.
Both Authorities should cooperate towards the establishment of a secure andreliable network environment. To confront cyber terrorism and other new
challenges due to the expansion of networks, cooperation on a global basis isindispensable. Both Authorities should cooperate to address immediately not only
technological issues but also institutional issues, while respecting the law related
to the freedom of communications.
Regarding VOIP, given the non-geographic nature of any IP-based services, it
raises a number of policy and regulatory questions that could be usefully
addressed by both the EU and Japanese Authorities in a coordinated fashion.
(4) WTOThe BDRT submitted a policy statement in December 2003 calling for an early
resumption of the WTO Doha Round, following a similar recommendation at thelast BDRT meeting in May 2003.
The BDRT welcomes the renewed political will of WTO Members to takeadvantage of the window of opportunity that has opened in the last months toreach a basic agreement on the framework modalities for further negotiations by
July 2004. This coming WTO General Council in Geneva in July is possibly thelast chance to launch the new negotiation under the original timeframe.
This negotiation needs to build on the lessons learned in Cancún and on the work
performed and the progress made since then.
The EU and Japan should demonstrate their strong political will to achieve
successful and meaningful negotiations by showing the need for flexibility in thecore areas of negotiation. The BDRT hopes that all other WTO members will also
equally adopt a positive and open attitude to ensure the success of the negotiation.
(5) New working fields
The BDRT is pleased to report that two new Working Parties, “Life Sciences andBiotechnology” and “Sustainable Development”, commenced and presented their42004 EU-Japan BDRT
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Recommendations, which should greatly contribute to the expansion of business
relations between the EU and Japan.
A. Life Sciences and Biotechnology
Biotechnology is a key technology, which can contribute considerably to thehealthcare, industrial, environmental and agriculture sectors. Prior to the
BDRT meeting a workshop was held in December 2003 in Tokyo with theactive participation of both the EU and Japanese authorities.
The BDRT recommends implementation with urgency of the Action Plans of
the Strategic Guidelines issued by the EU in 2002 and also by Japan in 2002
through strong initiatives by both Authorities. Continuous follow-up andamendments of these Action Plans are essential to catch up with the progressof LS&BT and to meet the changes of society.
The BDRT recommends a continuous dialogue at regular intervals among four
parties representing each government and industry of the EU and Japan to
discuss issues and implement the resulting Action Plans.
The sectorial recommendations covering LS&BT for Health, Industrial/
Environment Uses and Plants are areas where urgent solutions are desired.
Particularly, promoting public acceptance towards biotechnology, including
the GM-technology in the EU and Japan, is critical to enhance the related
business. The BDRT encourages concerted actions to be taken by the four
parties.
B. Sustainable Development
The BDRT considers that Sustainable Development and Corporate Social
Responsibility aim at setting the right balance between economic, social andenvironmental goals in a true “win-win” relationship with every stakeholder.
The BDRT (1) stresses the importance of voluntary actions from both industry
and individuals above any additional regulations and (2) requests the
Authorities to consult with the industries if any new regulation is considered.
Joint research projects in some sustainable development areas, including
technology development of alternative energy, should be supported by the
Authorities. Implementation of the current Kyoto Protocol and Post-Kyoto
protocol should receive special attention to secure the competitiveness of theindustry, especially if countries like the USA and Russia do not ratify theProtocol.
Finally, education to sustainable development and aid for developing countries
require more attention from the Authorities.

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Recommendations(6) EU Enlargement
The BDRT welcomes the enlargement of the European Union, which will
provide new substantial mutual trade, investment and economic opportunities
for the EU that will also benefit its trading partners, including Japan.
In order to realise these opportunities, transparency during the transition period
relating to regulations that affect business activities should be maintained.
Also, industrialists from new EU Member States should be invited to all events
that the BDRT will organise in areas such as ICT, Life Sciences &Biotechnology, and Sustainable Development, where new business alliances are
expected.
In order to avoid situations where the enlargement may hamper non-EU traders
and investors including those of Japan, the EU Authorities should monitor theprocess in accordance with WTO rules, and in close cooperation with non-EU
members.
2. Assessment of progress made on the BDRT’s 2003 Recommendations
The BDRT thinks it is important to assess past Recommendations made by the BDRT
in order to remind all parties involved of the current situation after receiving theProgress Reports from both the EU and Japanese Authorities.
The implementation of the Recommendations by the Authorities has progressed
steadily but not at a sufficient speed. The BDRT considers that a greater and more
intensive effort should be made by both Authorities to address these issues.
Hereafter some of the major implementations:
Trade and Investment
・ Adoption of the directive aimed at exempting withholding taxation on
payments of interests and royalties between affiliated companies (1-E-1)
・ Political agreement to extend the totalisation of basic pensions to non-EU
nationals when moving across the EU Member States (1-E-2)
・ Reasonable settlement of tariff classification (1-E-4)
・ Promotion of economic growth (1-J-1)
・ Championing business activities at local government level (1-J-2)
・ Legislation allowing foreign lawyers to form partnerships with Japaneselawyers and to employ Japanese lawyers as associates (1-J-4)
Accounting and Tax Issues
・ Adoption of consolidated tax system with 2% surtax eliminated (2-J-2)

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Information and Communication Technology
・ Development of new business models through linkage between
telecommunications and broadcasting (3-EJ-1)
・ Establishment of a competitive environment to stimulate investment inbroadband (3-EJ-4)
3. EU-Japan Centre for Industrial Cooperation
In this context, the EU-Japan Centre is expected to continue to support the EU-Japan
Business Dialogue Round Table and to keep adapting its activities to address the newchallenges.

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Part II
Policy Statement concerning the World Trade Organization

On the occasion of the annual meeting of the EU-Japan Business Dialogue Round
Table, business leaders from the European Union and Japan have adopted the following
message:
1.
We welcome that, following the enlargement on 1 May 2004, the European
Union’s WTO commitments and obligations were extended to its 10 new Member
States, and that the European Union is now speaking on behalf of 25 Member States.
This enlargement is an event of great significance for Europe, which may bring
important economic and trade opportunities to Europe and to its trading partners,
including Japan.
2.
The current trading Round continues to be immensely important for economic
growth, stability and development prospects of all stakeholders in the multilateral
trading system. We strongly believe that there is no substitute for the multilateral
trading system for achieving these objectives and those positive results on the Doha
Development Agenda (DDA) will help strengthen trust in that system.
3.
As stated at our last annual meeting held in Brussels in May 2003, we continue
to believe that the successful conclusion of an ambitious Round can help to improveglobal efficiency and international economic integration, and to provide meaningful
answers to the challenges of sustainable development in the global economy, therealization of a highly sophisticated Information Society, and the innovation of newtechnologies.
4.
Expressing our deep concern about the failure to reach the agreement to enhance
the negotiation on WTO’s New Doha Round at the Ministerial Conference in Cancún
last September, we sent a message to the EU Commission and the Japanese Governmenton December 18, 2003 that all parties would demonstrate flexibility such thatsatisfactory results for all parties may be achieved as soon as possible. We welcome therenewed political will of WTO Members to take advantage of the window ofopportunity that has opened in the recent months to reach a basic agreement on theframework modalities for further negotiations by July 2004. This agreement needs tobuild on the lessons learned in Cancún and on the progress made since then. Political
will must now be further transformed into concrete and decisive actions to ensure a
successful outcome of the Doha Round.

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5.
Progress on core issues of the DDA, such as agricultural and industrial market
access, services, rules and development issues is key to advance the negotiations. We
recognise the importance of achieving progress in the agricultural negotiations for the
majority of WTO Members, and we encourage all Members to show the required
flexibility in order to favour a balanced agreement in all three major pillars of the
agriculture negotiations - export competition, domestic support and market access. In
this regard, we welcome the European Union’s readiness to further move on export
subsidies, provided there is full parallelism by other members and an acceptableoutcome in the other pillars, as well as its willingness to find a constructive solution on
cotton. We also welcome that Japan, as a member of the G10 group, is prepared to
discuss various types of tariff reduction formula, if its concerns and sensitivities aretaken into account, while admitting that the framework for agriculture is a necessary
step to ensure reaching the results mandated by the Doha Declaration, and we recognisea need for coherence, flexibility and balance in order to accommodate the diversity ofmembers’ types of agriculture.
6.
We note that on the Singapore issues an emerging agreement exists among
WTO Members to launch multilateral negotiations on Trade Facilitation. It is important
to ensure that the necessary decisions on the modalities for these negotiations are taken
by July 2004. With regard to the other three issues - transparency in government
procurement, investment and competition – we stress the importance of keeping themwithin the WTO context, given the potential benefits that framework agreements inthese three areas would provide to all WTO Members. We also expect that the rules andprocedures for anti-dumping will be clarified and strengthened, as well as for subsidies
and regional trade agreements.
7.
Another crucial area where further progress must be made is trade anddevelopment. Some achievements have been accomplished since the launch of the
DDA, but further movement is urgently needed. Whilst acknowledging the real benefits
that multilateral trade and investment liberalisation can bring to development, wereiterate our wish that the concerns of the poorest and weakest countries are taken
account of in the negotiations and in the final DDA agreement. The European Union
and Japan should also continue their efforts for assisting developing countries to build
their technical and administrative capacity in order to allow their effective participationin the WTO’s decision-making process.
8.
We strongly encourage the European Union and Japan to be pro-active in thenegotiations and multiply their efforts towards achieving an agreement on frameworks
by July 2004. To this end, the European Union and Japan should keep close bilateralcontacts on all DDA issues and use all opportunities to co-ordinate their positions tofavour solutions, which can bring the multilateral trade agenda forward.

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Part IIIKey Points of the Recommendations
by Working Parties

The items of Recommendations by both the EU and Japanese Round Table Working
Parties are presented in this section.
Please refer to the attached documents for the details of Recommendations by Working
Parties on Trade and Investment (WP1), Accounting and Taxation (WP2), Information
and Communication Technology (WP3), Life Sciences & Biotechnology (WP5), andSustainable Development (WP6).

WP1 Trade and Investment
WP2 Accounting and Taxation
WP3 Information and Communication Technology
WP5 Life Sciences & Biotechnology
WP6 Sustainable Development

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