Japan is the world's largest net creditor. It is an active participant together with the United States in international discussions of the developing country indebtedness issue in a variety of fora. 5. Significant Barriers To U.S. Exports Over the past few years, the Government of Japan has removed most formal barriers to the import of goods and services. Import licenses, which are still technically required for all goods, are granted on a pro forma basis with limited exceptions (fish, leather goods and some agricultural products). Japan's average industrial tariff rate is one of the lowest in the world, at around two percent, and Japan has offered to reduce its industrial tariffs by one-third in the Uruguay Round Market Access Negotiations. The Uruguay Round negotiations seek to reduce further trade barriers in a number of areas, such as agriculture (where the United States seeks, among other things, an end to Japan's ban on rice imports), manufactured goods (where the United States has proposed the mutual elimination of tariffs for major industrial sectors), and the services sector. U.S. and Japanese negotiators concluded agreements over the past two years in the areas of supercomputers, commercial satellites, public sector purchases of computers and computer services, semiconductors and construction as well as wood products. In addition, the Government of Japan agreed to ease rules on value-added telecommunications services, to strengthen copyright protection for U.S. music recordings, and to resolve a dispute involving amorphous metals by facilitating market entry. Discussion of market barriers in the areas of autos, auto parts and paper products continues. Current obstacles to selling into the Japanese market do not fit conventional trade barrier categories. Instead of tariffs and official discrimination against imports, American exporters, in areas ranging from paper to computers, face a number of factors which raise costs and inhibit access. These include government red tape, the high cost of land, an outdated and fragmented distribution system, and insular attitudes by both government officials and private businessmen. The Japanese government has turned its attention to, and has begun to show some progress in, the areas of distribution, exclusionary business practices and land use, all of which should help cut the cost of new market entry for U.S. exporters. Impediments to trade in services have become prominent on the U.S.-Japan trade agenda in recent years. The U.S. and Japan concluded accords partially liberalizing access to the legal services market (1987), promoting free and open procurement of construction services and goods (1988 and 1991), and easing restrictions on telecommunications services (International Value-added Networks I, 1988; Cellular phones, 1989; International Value-added Networks II, 1990). In recent years, Japan has eased restrictions on financial services, though remaining barriers continue to be reviewed in the JAPAN U.S.-Japan Working Group on Financial Markets. Foreign architectural design and construction firms continue to encounter difficulties in competing for construction contracts set by Japanese Government agencies. The 1988 Major Projects Arrangement established leaner and more transparent procedures for foreign bidders. In 1991 that arrangement was revised to improve the procedures. We require additional experience to determine how the procedures will work in practice. In addition, despite partial liberalization of legal services in 1987, Japan maintains a number of severe restrictions in that area, including prohibition on employment of or partnership with Japanese lawyers. These difficulties are the subject of ongoing bilateral talks. Government procurement in Japan conforms to the letter of the GATT Procurement Code. Uruguay Round negotiations seek to significantly expand the coverage of the Code, including in Japan. The United States will continue to monitor Japanese Government procurement and to discuss procedures with the Japanese Government to assure that U.S. firms are given an opportunity to compete fairly and openly. The Government of Japan has simplified, harmonized and, in some cases, eliminated restrictive standards in order to follow international practices in many areas. For example, the 1985-87 Market-Oriented Sector-Selective (MOSS) talks resolved a host of standards problems and set in motion a continuing dialogue through MOSS follow up meetings of experts. However, in some cases, advances in technology make current standards outdated and restrictive; in other cases, Japanese industry supports unique safety standards which have the effect of limiting competition. Finally, bureaucratic inertia inhibits further simplification of standards. Japan requires that a prospective foreign investor notify the Ministry of Finance of his intention to make an investment thirty days before the investment takes place. Investments in sectors other than aircraft, space development, atomic energy, agriculture, fisheries, forestry, oil and gas production and distribution, leather and leather product manufacturing and tobacco manufacturing normally proceed without further formalities. In the Structural Impediments Initiative, the Government of Japan agreed to substantially eliminate its pre-notification procedures. Beginning on January 1, 1992, foreign direct investment in sectors on a "positive list" will no longer require prior notification. This positive list encompasses approximately 80 percent of the Japanese economy. Investments in sectors not on this list will still require prior notification but investments can only be restricted for national security reasons or for reasons consistent with the OECD Code on Capital Investment. Foreign investment in the banking and securities industries is subject to a reciprocity requirement. Japan provides foreign investors national treatment after entry with limited exceptions notified to the Organization for Economic Cooperation and Development (OECD). The Japanese Government continues to publish "visions" for the future development of promising industrial sectors and to provide some funds for pre-competitive research in certain industrial areas. The Japanese Government does not employ local equity requirements, export performance requirements, or local content requirements. The Japanese Government has not JAPAN forced foreign individuals or companies to divest themselves of investments. Japanese law allows foreign landholding, and foreign investors may repatriate capital and profits readily. The acquisition of existing Japanese companies is difficult due in part to crossholding of shares among allied companies, resulting in a low percentage of publicly traded common stock, and to the obstacles outsiders face in gaining access to company records. The difficulty of acquisition of existing companies inhibits foreign investment. 6. Export Subsidies Policies Japan adheres to the Organization of Economic Cooperation and Development (OECD) export credit arrangement, including the agreement on the use of tied aid credit. The Government of Japan subsidizes exports as permitted by the OECD arrangement, which allows softer terms for export financing to developing nations. Japan has virtually eliminated Japan-tied aid credits and now extends about three-quarters of its loan aid under untied terms. But U.S. exporters face difficulties in competing due to the use of (1) "Less Developed Country" (LDC) untied aid, where bidding is only open to Japanese and LDC firms, and (2) tied feasibility studies (provided by grant aid) for untied (loan aid) projects which result in project specifications more suited to Japanese than U.S. bidders. These programs are the subject of continued discussions with the OECD. Japan exempts exports from the three percent VAT-like consumption tax initiated in April 1989. This provision does not appear to have any significant impact on a manufacturer's decision to sell domestically or export. 1. Protection of U.S. Intellectual Property Rights Japan is a party to the Berne, Paris and Universal Copyright conventions and the Patent Cooperation Treaty. Japan's Intellectual Property Rights (IPR) regime affords national treatment to U.S. entities. The United States and Japan agree that uniform IPR standards and better enforcement are needed. To that end, U.S., Japanese and European negotiators are engaged in trilateral patent harmonization talks. Discussions, including the protection of semiconductor mask works, are also taking place in the World Intellectual Property Organization (WIPO) and the General Agreement on Tariffs and Trade (GATT) talks. Average patent pendency in Japan is one of the longest among developed countries, averaging over five years from application to grant. Japan's slow patent processing has been discussed in the SII talks, and the average patent examination portion of the pendency period has been reduced from about 37 months to 32 months, with further efforts planned to reduce this period to 24 months maximum. Coupled with the practice of laying open all applications to public inspection 18 months after filing, the long patent pendency period results in a long period of public access to the application without effective legal protection. Many Japanese firms use the patent system as a tool of corporate strategy, filing many applications to cover slight variations in known technology, a JAPAN practice facilitated by access to previously laid-open applications and the patent law's compulsory licensing provisions for dependent patents. U.S. filers often find that their Japanese rights are closely circumscribed by prior filing of applications for a very similar invention or process. The need for individual responses to multiple patent oppositions often increases delay and processing costs. Moreover, Japanese courts interpret patent applications narrowly and adjudicate cases slowly. Japanese patent law lacks a doctrine of equivalence and civil procedure lacks a discovery procedure to seek evidence of infringement. Trademark applications are also processed slowly, sometimes taking three to four years. Infringement carries no penalty until an application is approved. Service marks already widely known in Japan can be protected in court only under the unfair competition law. Japan has announced its intention to amend the trademark law to explicitly protect service marks. A service mark law has been passed by the Diet and will be implemented in April 1992. In the meantime, the Japan Patent Office, following a 1989 court decision, has stopped permitting firms in service industries to register or renew registration of trademarks for products not sold in commerce but used or distributed in conjunction with their services. Japanese copyright protection of algorithms and programming languages remains ambiguous. Sale of pirate videos remains a problem although the Japanese police have cooperated with strong efforts by the Motion Picture Association of America to raid video pirates under Japan's 1988 legislation which facilitates prosecution of video pirates. Japan has promised to vigorously enforce national treatment rights, and a revised copyright law was passed in 1991 to take effect in January 1992. Under the revised law, copyright protection was extended from 30 to 50 years. Pre-1978 foreign recordings are now protected back to 1968, and foreign recordings are provided with exclusive rights by cabinet order. While Japan's new trade protection law, enacted in 1990, is a step forward from protection by ordinary contract, it will still be very difficult to get an injunction against a third-party transfers of purloined trade secrets. The right of workers to organize, bargain and act collectively is assured by the Constitution. Approximately 25 percent of the active work force belongs to unions. Unions are free of government control and influence. Members of the armed forces, police, and firefighters, however, are not permitted to form unions or to organize. Japanese law allows unions to lobby and to make political campaign contributions, and most unions are involved in political activity as well as labor relations. The right to strike is implicit in the Constitution and it is exercised. Public employees, however, do not have the right to strike although they do have recourse JAPAN to mediation and arbitration in order to resolve disputes. exchange for a ban on their right to strike, government employees' pay raises are determined by the government based on a recommendation by the independent National Personnel Authority. b. The Right to Organize and Bargain Collectively In The Constitution states that unions have the right to organize, bargain and act collectively, and these rights are exercised in practice. Collective bargaining is widely practiced. The annual "spring wage offensive," in which individual unions in each industry conduct negotiations simultaneously with their firms, attracts national attention. Japanese management usually consults closely with unions on issues. Antiunion discrimination is prohibited by law and in practice does not take place. C. Prohibition of Forced or Compulsory Labor The labor standards law prohibits the use of forced labor and there are no known cases of forced or compulsory labor. d. Minimum Age of Employment of Children Under the revised labor standards law of 1987, minors under 15 years of age may not be employed as workers and those under the age of 18 may not be employed in dangerous or harmful work. Child labor laws are rigorously enforced by the labor inspection division of the Ministry of Labor. e. Acceptable Conditions of Work Minimum wages are administratively determined by the Minister of Labor or the Director of the Prefectural Labor Standards Office based usually on the recommendation of the Tripartite Minimum Wage Council. Minimum wage rates vary by industry and region. The Labor Standards Law provides for the phased reduction of maximum working hours from the present 44 hour 6 day workweek to 40 hours by early in the 1990's. The Minister of Labor effectively administers various laws and regulations governing occupational health and safety, principal among which is the Industrial Safety and Health Law of 1972. Standards are set by the Ministry of Labor and issued after consultation with the Standing Committee on Safety and Health of the Tripartite Labor Standards Commission. Labor inspectors have the authority to suspend unsafe operations immediately and the law provides for workers to voice concerns over occupational safety and to remove themselves from unsafe working conditions without jeopardizing their continued employment. f. Rights in Sectors with U.S. Investment Internationally recognized worker rights standards, as defined by the ILO, are protected under Japanese law and cover all workers in Japan. U.S. capital is invested in all major sectors of the Japanese economy, including petroleum, food and related products, primary and fabricated metals, machinery, electric and electronic equipment, other manufacturing and wholesale trade. |