EU-Japan Business Round Table

RECOMMENDATIONS"Unlocking Growth Potential in EU-Japan Business"
3 & 4 April 2012
Tokyo, Japan

1. Introduction

The EU-Japan Business Round Table (BRT) held its Annual Meeting in Tokyo on 3-4April 2012 under the theme "Unlocking growth potential in EU-Japan business". The
meeting was chaired by Mr. Hiromasa Yonekura, Chairman of Sumitomo ChemicalCo., Ltd., and Dr. Jean-Yves Le Gall, Chairman and CEO of Arianespace.

The BRT had the pleasure and honour of welcoming high-level representatives ofthe Japanese and EU authorities:

Mr. Yukio Edano, Minister of Economy, Tradeand Industry of Japan, Mr. Seishu Makino, Senior Vice Minister of Economy, Tradeand Industry of Japan, Mr. Ryuji Yamane, Parliamentary Senior Vice-Minister for
Foreign Affairs of Japan, and Mr. Tetsuo Yamakawa, Vice-Minister for Policy
Coordination (International Affairs), Ministry of Internal Affairs and Communicationsof Japan, as well as Mr. Antti Peltomäki, Deputy Director General for Enterprise andIndustry of the European Commission.

The meeting addressed the following subjects:
1. Discussion and adoption of general and sectoral recommendations
2. Special discussions on (i) EU-Japan FTA/EPA opportunities and challenges, (ii)EU-Japan cooperation in energy-related issues, and (iii) Growth strategies andre-industrialisation of advanced economies
3. Discussions with Japanese and EU authorities
4. Informal discussions on additional subjects of special interest:(i) Implications offinancial issues for business, (ii) Value chain safety, (iii) Human resources
development, and (iv) Corporate strategies for the greening of industry.

In addition to the issue of a EU-Japan FTA/EPA and a political and cooperationagreement, major matters of great mutual interest that were discussed at the1meeting were the development of bilateral industrial cooperation, cooperation oninternational standards, and the future direction of multilateral trade frameworks.

BRT members agreed to jointly submit their recommendations to Prime Minister
Yoshihiko Noda of Japan, European Council President Herman Van Rompuy, andEuropean Commission President José Manuel Barroso later this month.

2. BackgroundAs major advanced economies and major global traders and investors, the EU andJapan can do more to unlock the enormous growth potential which their bilateral
economic relations can offer. They are now working on enhancing bilateral trade,investment and cooperation and building a closer relationship. As both strive toovercome global financial instability and economic uncertainties, it is crucial that theyjoin forces in tackling common challenges in order to attain a long-term, sound andstronger growth.

2011 saw economic uncertainty in the EU. Concerns about the sustainability ofgovernment debt in some EU Member States caused financial market instability anddamaged the confidence of businesses, investors and consumers. Business madeclear that the euro was essential to investment and the growth of the EU
economy. EU leaders improved economic governance, but efforts must continue tobuild on the recent momentum and deliver the necessary structural reforms.

Japan continues its strenuous efforts to achieve full recovery from the disaster of theMarch 2011 Great East Japan Earthquake and rebuild its economy. Japanesecompanies were recovering faster than expected from the aftermath but more
recently the pace is slowing as they face significant challenges such as weakdomestic demand and prolonged deflation, as well as signs of slowdown in someemerging market economies.

Under these challenging circumstances, the EU and Japan have been working
proactively during the past year to further deepen and strengthen their political andeconomic cooperation, with particular attention to boosting growth. At the EU-Japan
Summit of May 2011, the EU and Japanese authorities agreed to start discussions
with a view to defining the scope and level of ambition of a deep and comprehensive2

EU-Japan FTA/EPA as well as the scope and level of a strong political andcooperation agreement. In September 2011, the BRT's "Joint Statement Towards an
EU-Japan FTA/EPA" requested the EU and Japanese authorities to seek a highlevel of ambition and consider removing all the commercially significant obstacles totrade and investment in all areas of shared business interest while leaving no room
for misunderstanding in the scoping process, lest the outcome of the scoping would
fail to live up to the expectations of business. The BRT also recommended
conducting any future negotiations in full transparency and in close cooperation withthe business community. Also, the BRT called on the EU and Japanese communities
to discuss the issue of non-tariff barriers (NTBs) bilaterally on the basis of anadequate understanding of each other’s interests and concerns and work out, on asectoral basis, concrete and realistic solutions in order to support the governments’efforts. Some promising results were presented in this Annual Meeting.

3. Calls and Recommendations

The BRT calls on the European Commission and the government of Japan toexpedite the remaining efforts necessary to complete their scoping activities onambitious terms. The BRT also urges the European Commission and the Council ofthe EU to expedite their respective work on the mandates to authorise the European
Commission to negotiate an FTA/EPA and a political and cooperation agreementwith Japan on the basis of a successful scoping and keeping in mind the high level ofambition shown at the May 2011 EU-Japan Summit and supported by the BRT in its
September 2011 "Joint Statement Towards an EU-Japan FTA/EPA". The EU-Japan
FTA/EPA would have to be ambitious, balanced, mutually beneficial andcomprehensive and tackle major outstanding issues, such as tarrifs, non-tariff,barriers, public procurement, investment, and harmonization/mutual recognition ofregulations and standards, to develop and unlock the growth potential of EU-Japaneconomic relations.
The BRT is strongly convinced that the EU and Japan, two of the world’s largest andmost advanced economies, can achieve sound and stronger growth together andcontribute to the sustainable development of the global economy by promoting more
open and free trade and investment, accelerating regulatory and standards
harmonisation, encouraging small and medium enterprises to realise their growthpotential in trade, while enhancing bilateral cooperation in a range of growth areas
3such as life science, biotechnology, healthcare, ICT, aerospace, energy, and theenvironment.

The BRT supports a strong multilateral trading system and calls on the WTO tobreak the current deadlock in the Doha Development Agenda negotiation anddemonstrate strong leadership in advancing trade liberalization as the world’s onlyinternational organization to create rules and set standards on trade at themultilateral level.

The BRT also makes the following calls to the EU and Japanese authorities:(A) Trade, Investment, and Regulatory Cooperation
The BRT calls on the European Commission and the government of Japan toexpedite the remaining efforts necessary to complete their scoping activities
on ambitious terms. The BRT also urges the European Commission and theCouncil of the EU to expedite their respective work on the mandates toauthorise the European Commission to negotiate an FTA/EPA and a politicaland cooperation agreement with Japan on the basis of a successful scoping
and keeping in mind the high level of ambition shown at the May 2011
EU-Japan Summit and supported by the BRT in its September 2011 "Joint
Statement Towards an EU-Japan FTA/EPA". The EU-Japan FTA/EPA would
have to be ambitious, balanced, mutually beneficial and comprehensive andtackle major outstanding issues, such as tarrifs, non-tariff, barriers, publicprocurement, investment, and harmonization/mutual recognition or regulations
and standards, to develop and unlock the growth potential of EU-Japaneconomic relations.

The EU and Japan should jointly call for a breakthrough in WTO Doha
Development Agenda negotiations and for a statement of strong support for
the fight against protectionism. The WTO should focus more on its corefunctions, namely trade liberalisation and rule-making, advancing on acase-by-case basis. This will showcase the advantages of comprehensive
market access negotiations and prevent weakening of the multilateral tradesystem.

 Both the EU and Japanese Authorities should apply international standards
and enhance co-operation in the promotion of new global standards. They
should mutually recognise products certified under similar and equivalent4

product standards and cooperate in efforts to harmonize regulations andsystems where possible.
 Japan and the Member States of the EU should make further efforts toexpand the network of Social Security Agreements. They should also
introduce an interim measure, by which a host country either exempts
contributions to pension funds unilaterally or refunds the contributions in fullwhen expatriates return to their home country. Both Authorities should also
promote international frameworks enabling secure movement of personal
data within business organisations.
 The EU and Japan should aim for ”Better Regulation” through an improved
information exchange focusing on both existing and future regulation.
 The EU and Japanese Authorities should develop measures to promote andassist SMEs to explore and seize business opportunities in each other’smarket. Should negotiations for an FTA/EPA begin, specific consideration
should be made to establish measures for SMEs within the framework ofnegotiations.

(B) Life Sciences and Biotechnologies, Healthcare and Well-BeingGeneral

The BRT recommends to the Japanese Authority that they should formulate
concrete strategies and action plans in Life Sciences & Biotechnology for thegovernments “National Strategy / Policy for the Rebirth of Japan”, thereby
focus on measures to support the improvement of efficient healthcare
practices, food security / supply and innovations in Biotechnology.

HealthCare

The BRT asks both Authorities to support the implementation of new
innovation-rewarding pricing systems for pharmaceutical products, including
the abolishment of special price cuts at first generic launch, and theabolishment of the rule of re-pricing by market expansion in Japan. BothAuthorities should enhance competitive pricing systems in order to promote
innovative products.

The BRT recommends to both Authorities that they support to improve thepharmaceutical and medical device business environments by proceedingwith regulatory harmonization and further extension of “Mutual RecognitionAgreements” in order to avoid redundant inspections of manufacturing
5facilities (e.g. injectable pharmaceuticals and APIs) and ensure recognition ofquality management audit results for lower risk medical devices.
The BRT calls for harmonization regulatory standards for the approval of
non-invasive diagnostics between EU and Japan.

The BRT asks the Japanese Authorities to support the reinforcement of strict
regulations for GMP on medicinal gases.

Animal Health
The BRT recommends to both Authorities that they should introduce a 1-1-1
concept (one dossier – one assessment – one decision on marketingauthorization) for all animal health products, thereby further harmonize theregulatory requirements for product registration, shorten review times andrecognize the GMP certification for veterinary products.

The BRT recommends to both Authorities that they should promote theresponsible use of antibiotics in Animal Health.

Plant Protection & Biotechnology
The BRT recommends to both Authorities that they should enhance theacceptance of GMO’s by educating people about the efficiency and safety ofGMO’s based on scientific knowledge considering world food supply anddemand prospects in cooperation with the private sector.

The BRT asks the Japanese Authority to implement concrete action plans fora higher food self-sufficiency of Japan.

The BRT recommends to the EU Authorities that they should shorten thereview times for new applications / product registrations in both plant
protection and biotechnology.

(C) Innovation, Information & Communication Technologies
ICT

Both authorities should execute respective growth strategy and ICT strategy.

Both Authorities should coordinate trading principles of ICT services.

Both Authorities should build trusted and safe online environment.

Both Authorities should build robust critical infrastructure supported by ICT.

Both Authorities should deploy Next Generation Broadband Networks.

Both Authorities should continue efforts for ICT usage towards social challenges.

6Both Authorities should balance personal data protection and innovation in thecloud computing era

Both Authorities should expand product coverage and membership of ITABoth Authorities should harmonise M2M communication and ITS regulations.

European Authorities should conduct fundamental reform of the Private Copying
Levy System and apply reduced VAT rate to e-Books

Innovation in general:Both Authorities should enhance cooperation on 21st Century societalchallenges.

Both Authorities should strengthen business cooperation between EU andJapanese clusters.

Innovation in aeronautics, space and defence:Authorities should significantly upgrade bilateral industrial cooperation.

Authorities should broaden bilateral cooperation on environmental issues.

Aircraft certification authorities should make a full bilateral agreement.

Authorities should upgrade their cooperation on low altitude IFR routes andsatellite based navigation regulation for helicopters.

Authorities should establish a dialogue on satellite technology cooperation.

Authorities should establish mutual backup of government launch missions.

Authorities should establish a close cooperation between the EU’s Galileo andJapan’s Quasi-Zenith Satellite System.

Authorities should spearhead a global effort of active space debris removal.

Authorities should expand agreements to exchange classified information.

In relaxing the three principles of arms exports, Japan’s Authorities should givethe EU industry opportunities equal to that provided to the US industry.

Japanese Authorities should facilitate the re-export of Defence equipment
imported to Japan for demonstration purposes.

(D) Financial Services, Accounting and Tax Issues
Regulation should be implemented looking ahead the broader economicimplication; otherwise the financial sector may be safer but not able to fulfil its
role to support economic recovery. Moreover, excessive ‘ring-fencing’ in eachjurisdiction and duplication of regulations have to be avoided with effectivesupervision and international coordination.
7

The BRT calls on Japan to review the proposed 2012 tax reform limiting
deductible interest to 50% of taxable income (after adjustments for interestand depreciation). The reform will curb foreign investment into Japan as it willcause double taxation of interest income in both the foreign investor’s homecountry as well as in Japan.

In the perspectives of coping with today’s prevailing credit crisis, theEuropean governments should cautiously make a decision when and how tointroduce tighter regulations in order to minimize potential economic
slowdown and avoid worsening the current situation.

(E) Energy, Environment, and Sustainable Development
Natural Disasters and Safety Measures
The earthquake and the tsunami who struck Tohoku, and the Fukushima
nuclear power plant situation demonstrate the need for a more flexible
approach to allow a swift acceptance of support from overseas to facilitate theinternational support in case of disaster.

Alternative and Renewable Energies

The drivers (long term price competitiveness, energy independence, climatechange and energy security) for using alternative and renewable energies,including nuclear, will remain. The development of rechargeable batteries andits multiple applications, from EV to smart cities and smart grids is a particulararea where Japan and EU should provide support and seek harmonization ofinfrastructure and regulation.

In the wake of the Fukushima accident, the rising expectations for nuclear
energy call for a strengthened nuclear safety framework. Japan and the EUshould cooperate to promote “world safety standard” and capacity building,and encourage skilled and independent safety authorities.

Global warming issues


It is urgent to reduce Green House Gas emission. It is therefore necessarythat Japan and the EU engage all large emitting countries in a new, fair andeffective international framework. At the same time, Japan and EU shallencourage the widespread use of existing energy efficient and low carbon
products and technologies, support an effective technology transfer process
and cooperate in developing innovative solutions.
8Securing Supplies of Rare Metal Resources and other Raw Material
Japan and the EU should promote actions in international for a to establish aset of rules on access to raw material, as a way to manage in a fair way thepressure on price and availability of these resources stemming from a growing
demand and in some cases on limitation of supply.

The above bullet points are summarised excerpts of the BRT's five much more
complete and extensive sets of BRT Recommendations attached hereto.

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